SECURITIES AND EXCHANGE COMMISSIONpdf.secdatabase.com/541/0001041061-12-000005.pdf · and location...

Business Address1441 GARDINER LANELOUISVILLE KY 402135028748300

Mailing Address1900 COLONEL SANDERSLANELOUISVILLE KY 40213

SECURITIES AND EXCHANGE COMMISSION

FORM 10-KAnnual report pursuant to section 13 and 15(d)

Filing Date: 2012-02-21 | Period of Report: 2011-12-31SEC Accession No. 0001041061-12-000005

(HTML Version on secdatabase.com)

FILERYUM BRANDS INCCIK:1041061| IRS No.: 133951308 | State of Incorp.:NC | Fiscal Year End: 0526Type: 10-K | Act: 34 | File No.: 001-13163 | Film No.: 12625110SIC: 5812 Eating places

Copyright © 2014 www.secdatabase.com. All Rights Reserved.Please Consider the Environment Before Printing This Document

http://www.sec.gov/Archives/edgar/data/0001041061/000104106112000005/0001041061-12-000005-index.htm

http://edgar.secdatabase.com/541/104106112000005/filing-main.htm

http://www.secdatabase.com/CIK/1041061

http://www.secdatabase.com/CIK/1041061

http://www.secdatabase.com/FileNumber/113163

http://www.secdatabase.com/SIC/5812

http://www.secdatabase.com

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

[ü] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2011

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from ____________ to _________________

Commission file number 1-13163

YUM! BRANDS, INC.(Exact name of registrant as specified in its charter)

North Carolina 13-3951308(State or other jurisdiction of (I.R.S. Employerincorporation or organization) Identification No.)

1441 Gardiner Lane, Louisville, Kentucky 40213(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (502) 874-8300

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, no par value New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ü No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No ü

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. Yes ü No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes ü No



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. [ü]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reportingcompany. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the ExchangeAct (Check one): Large accelerated filer: [ü] Accelerated filer: [ ] Non-accelerated filer: [ ] Smaller reporting company: [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No _ü



The aggregate market value of the voting stock (which consists solely of shares of Common Stock) held by non-affiliates of theregistrant as of June 11, 2011 computed by reference to the closing price of the registrant’s Common Stock on the New York StockExchange Composite Tape on such date was $24,430,261,521. All executive officers and directors of the registrant have been deemed,solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant. The number of shares outstanding of the registrant’sCommon Stock as of February 14, 2012 was 460,414,239 shares.

Documents Incorporated by Reference

Portions of the definitive proxy statement furnished to shareholders of the registrant in connection with the annual meeting ofshareholders to be held on May 17, 2012 are incorporated by reference into Part III.



Forward-Looking Statements

In this Form 10-K, as well as in other written reports and oral statements that we make from time to time, we present “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995, and we are including this statement for purposes of complying with those safe harbor provisions.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statementsoften include words such as “may,” “will,” “estimate,” “intend,” “seek,” “expect,” “project,” “anticipate,” “believe,” “plan” or othersimilar terminology. These forward-looking statements are based on current expectations and assumptions and upon data available at thetime of the statements and are neither predictions nor guarantees of future events or circumstances. The forward-looking statements aresubject to risks and uncertainties, which may cause actual results to differ materially. Important factors that could cause actual resultsand events to differ materially from our expectations and forward-looking statements include (i) the risks and uncertainties described inthe Risk Factors included in Part I, Item 1A of this Form 10-K and (ii) the factors described in Management’s Discussion and Analysisof Financial Condition and Results of Operations included in Part II, Item 7 of this Form 10-K. You should not place undue reliance onforward-looking statements, which speak only as of the date hereof. In making these statements, we are not undertaking to address orupdate any risk factor set forth herein in future filings or communications regarding our business results.

2



PART I

Item 1. Business.

YUM! Brands, Inc. (referred to herein as “YUM”, the “Registrant” or the “Company”), was incorporated under the laws of the state ofNorth Carolina in 1997. The principal executive offices of YUM are located at 1441 Gardiner Lane, Louisville, Kentucky 40213, andthe telephone number at that location is (502) 874-8300. Our website address is http://www.yum.com.

YUM, together with its subsidiaries, is referred to in this Form 10-K annual report (“Form 10-K”) as the Company. The terms “we,” “us”and “our” are also used in the Form 10-K to refer to the Company. Throughout this Form 10-K, the terms “restaurants,” “stores” and“units” are used interchangeably. While YUM! Brands, Inc., referred to as the Company, does not directly own or operate any restaurants,throughout this document we may refer to restaurants as being Company-operated.

(a) General Development of Business

In January 1997, PepsiCo announced its decision to spin-off its restaurant businesses to shareholders as an independent publiccompany. Effective October 6, 1997, PepsiCo disposed of its restaurant businesses by distributing all of the outstanding shares ofCommon Stock of YUM to its shareholders. On May 16, 2002, following receipt of shareholder approval, the Company changed itsname from TRICON Global Restaurants, Inc. to YUM! Brands, Inc.

(b) Financial Information about Operating Segments

YUM consists of five operating segments: YUM Restaurants China ("China" or “China Division”), YUM Restaurants International(“YRI” or “International Division”), Taco Bell U.S., KFC U.S. and Pizza Hut U.S. The China Division includes only mainland China,and the International Division includes the remainder of our international operations. For financial reporting purposes, managementconsiders the three U.S. operating segments to be similar and, therefore, has aggregated them into a single reportable operating segment(“U.S.”). In December 2011, the Company sold the Long John Silver's ("LJS") and A&W All-American Food Restaurants ("A&W")brands to key franchisee leaders and strategic investors in separate transactions. Financial information prior to these transactions reflectsour ownership of these brands.

Operating segment information for the years ended December 31, 2011, December 25, 2010 and December 26, 2009 for the Companyis included in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in Part II, Item 7,pages 21 through 47 and in the related Consolidated Financial Statements in Part II, Item 8, pages 48 through 93.

(c) Narrative Description of Business

General

YUM is the world’s largest quick service restaurant (“QSR”) company based on number of system units, with approximately 37,000units in more than 120 countries and territories. Primarily through the three concepts of KFC, Pizza Hut and Taco Bell (the “Concepts”),the Company develops, operates, franchises and licenses a worldwide system of restaurants which prepare, package and sell a menu ofcompetitively priced food items. Units are operated by a Concept or by independent franchisees or licensees under the terms of franchiseor license agreements. Franchisees can range in size from individuals owning just one restaurant to large publicly traded companies. Inaddition, the Company owns non-controlling interests in Chinese entities who operate in a manner similar to KFC franchisees, as wellas a non-controlling interest in Little Sheep Group Limited ("Little Sheep"), a casual dining concept headquartered in Inner Mongolia,China. On February 1, 2012, we acquired a controlling interest in Little Sheep. See Notes 4 and 21 for details.

The China Division, based in Shanghai, China, comprises approximately 4,500 system restaurants, primarily Company-owned KFCsand Pizza Huts. In 2011, the China Division recorded revenues of approximately $5.6 billion and Operating Profit of $908 million. TheInternational Division, based in Dallas, Texas, comprises approximately 14,500 system restaurants, primarily franchised KFCs and PizzaHuts, operating in over 120 countries outside the U.S. In 2011 YRI recorded revenues of approximately $3.3 billion and Operating Profitof $673 million. We have approximately 18,000 system restaurants in the U.S. and recorded revenues of approximately $3.8 billion andOperating Profit of $589 million in 2011.

3



Restaurant Concepts

Most restaurants in each Concept offer consumers the ability to dine in and/or carry out food. In addition, Taco Bell and KFC offer adrive-thru option in many stores. Pizza Hut offers a drive-thru option on a much more limited basis. Pizza Hut and, on a much morelimited basis, KFC offer delivery service.

Each Concept has proprietary menu items and emphasizes the preparation of food with high quality ingredients, as well as unique recipesand special seasonings to provide appealing, tasty and attractive food at competitive prices.

The franchise programs of the Company are designed to assure consistency and quality, and the Company is selective in grantingfranchises. Under standard franchise agreements, franchisees supply capital – initially by paying a franchise fee to YUM, purchasingor leasing the land, building, equipment, signs, seating, inventories and supplies and, over the longer term, by reinvesting in thebusiness. Franchisees then contribute to the Company’s revenues through the payment of royalties based on a percentage of sales.

The Company believes that it is important to maintain strong and open relationships with its franchisees and their representatives. To thisend, the Company invests a significant amount of time working with the franchisee community and their representative organizations onall aspects of the business, including products, equipment, operational improvements and standards and management techniques.

The Company and its franchisees also operate multibrand units, primarily in the U.S., where two or more of the Concepts are operated ina single unit.

Following is a brief description of each Concept:

KFC

• KFC was founded in Corbin, Kentucky by Colonel Harland D. Sanders, an early developer of the quick service food businessand a pioneer of the restaurant franchise concept. The Colonel perfected his secret blend of 11 herbs and spices for KentuckyFried Chicken in 1939 and signed up his first franchisee in 1952.

• KFC operates in 115 countries and territories throughout the world. As of year end 2011, KFC had 3,701 units in China, 8,920units in YRI and 4,780 units in the U.S. Approximately 79 percent of the China units, 11 percent of the YRI units and 10 percentof the U.S. units are Concept-owned.

• As of year end 2011, KFC was the leader in the U.S. chicken QSR segment among companies featuring chicken-on-the-bone astheir primary product offering, with a 39 percent market share in that segment, which is over twice as large as that of its closestnational competitor. (Source: The NPD Group, Inc./CREST®, year ending December 2011, based on consumer spending)

• KFC restaurants across the world offer fried and non-fried chicken products such as sandwiches, chicken strips, chicken-on-the-bone and other chicken products marketed under a variety of names. KFC restaurants also offer a variety of side items suited tolocal preferences and tastes. Restaurant decor throughout the world is characterized by the image of the Colonel.

Pizza Hut

• The first Pizza Hut restaurant was opened in 1958 in Wichita, Kansas, and within a year, the first franchise unit wasopened. Today, Pizza Hut is the largest restaurant chain in the world specializing in the sale of ready-to-eat pizza products.

• Pizza Hut operates in 97 countries and territories throughout the world. As of year end 2011, Pizza Hut had 764 units in China,5,383 units in YRI and 7,600 units in the U.S. All of the China units and approximately 11 percent of the YRI units and 6 percentof the U.S. units are Concept-owned.

• Pizza Hut operates in the delivery and casual dining segments around the world. Outside of the U.S., Pizza Hut often uses uniquebranding to differentiate its delivery and casual dining businesses.

• As of year end 2011, Pizza Hut was the leader in the U.S. pizza QSR segment, with a 15 percent market share in that segment.(Source: The NPD Group, Inc./CREST®, year ending December 2011, based on consumer spending)

4



• Pizza Hut features a variety of pizzas which are marketed under varying names. Each of these pizzas is offered with a varietyof different toppings suited to local preferences and tastes. Many Pizza Huts also offer pasta and chicken wings, including over3,000 stores offering wings under the brand WingStreet, primarily in the U.S. Pizza Hut units feature a distinctive red roof logoon their signage.

Taco Bell

• The first Taco Bell restaurant was opened in 1962 by Glen Bell in Downey, California, and in 1964, the first Taco Bell franchisewas sold.

• Taco Bell operates in 27 countries and territories throughout the world. As of year end 2011, there were 5,670 Taco Bell units inthe U.S. and 275 in YRI. Approximately 21 percent of the U.S. units and 1 percent of the YRI units are Concept-owned.

• As of year end 2011, Taco Bell was the leader in the U.S. Mexican QSR segment, with a 50 percent market share in that segment.(Source: The NPD Group, Inc./CREST®, year ending December 2011, based on consumer spending)

• Taco Bell specializes in Mexican-style food products, including various types of tacos, burritos, quesadillas, salads, nachos andother related items. Taco Bell units feature a distinctive bell logo on their signage.

Restaurant Operations

Through its Concepts, YUM develops, operates, franchises and licenses a worldwide system of both traditional and non-traditional QSRrestaurants. Traditional units feature dine-in, carryout and, in some instances, drive-thru or delivery services. Non-traditional units,which are typically licensed outlets, include express units and kiosks which have a more limited menu, usually lower sales volumes andoperate in non-traditional locations like malls, airports, gasoline service stations, train stations, subways, convenience stores, stadiums,amusement parks and colleges, where a full-scale traditional outlet would not be practical or efficient.

Restaurant management structure varies by Concept and unit size. Generally, each Concept-owned restaurant is led by a restaurantgeneral manager (“RGM”), together with one or more assistant managers, depending on the operating complexity and sales volumeof the restaurant. Most of the employees work on a part-time basis. Each Concept issues detailed manuals, which may then becustomized to meet local regulations and customs, covering all aspects of restaurant operations, including food handling and productpreparation procedures, food safety and quality, equipment maintenance, facility standards and accounting control procedures. Therestaurant management teams are responsible for the day-to-day operation of each unit and for ensuring compliance with operatingstandards. CHAMPS – which stands for Cleanliness, Hospitality, Accuracy, Maintenance, Product Quality and Speed of Service– is our proprietary core systemwide program for training, measuring and rewarding employee performance against key customermeasures. CHAMPS is intended to align the operating processes of our entire system around one set of standards. RGMs’ efforts,including CHAMPS performance measures, are monitored by Area Coaches. Area Coaches typically work with approximately six totwelve restaurants. Various senior operators visit Concept-owned restaurants from time to time to help ensure adherence to systemstandards and mentor restaurant team members.

Supply and Distribution

The Company’s Concepts, including Concept units operated by its franchisees, are substantial purchasers of a number of food and paperproducts, equipment and other restaurant supplies. The principal items purchased include chicken, cheese, beef and pork products, paperand packaging materials.

The Company is committed to conducting its business in an ethical, legal and socially responsible manner. All restaurants, regardlessof their ownership structure or location, must adhere to strict food quality and safety standards. The guidelines are translated to localmarket requirements and regulations where appropriate and without compromising the standards. The Company has not experienced anysignificant continuous shortages of supplies, and alternative sources for most of these products are generally available. Prices paid forthese supplies fluctuate. When prices increase, the Concepts may attempt to pass on such increases to their customers, although there isno assurance that this can be done practically.

China Division In China, we work with approximately 500 independent suppliers, mostly China-based, providing a wide range ofproducts. We own most of the distribution system which includes approximately 20 logistics centers.



5



International Division Throughout YRI we and our franchisees use decentralized sourcing and distribution systems involving manydifferent global, regional, and local suppliers and distributors. In our YRI markets we have approximately 1,500 suppliers, includingU.S.-based suppliers that export to many countries.

U.S. Division The Company, along with the representatives of the Company’s KFC, Pizza Hut and Taco Bell franchisee groups, aremembers in the Unified FoodService Purchasing Co-op, LLC (the “Unified Co-op”) which was created for the purpose of purchasingcertain restaurant products and equipment in the U.S. The core mission of the Unified Co-op is to provide the lowest possible sustainablestore-delivered prices for restaurant products and equipment. This arrangement combines the purchasing power of the Concept-ownedand franchisee restaurants in the U.S. which the Company believes leverages the system’s scale to drive cost savings and effectivenessin the purchasing function. The Company also believes that the Unified Co-op has resulted, and should continue to result, in closeralignment of interests and a stronger relationship with its franchisee community.

Most food products, paper and packaging supplies, and equipment used in restaurant operations are distributed to individual restaurantunits by third-party distribution companies. McLane Company, Inc. (“McLane”) is the exclusive distributor for the majority of items usedin Concept-owned restaurants and for a substantial number of franchisee and licensee stores. The Company entered into an agreementwith McLane effective January 1, 2011 relating to distribution to Concept-owned restaurants. This agreement extends through December31, 2016 and generally restricts Concept-owned restaurants from using alternative distributors for most products.

Trademarks and Patents

The Company and its Concepts own numerous registered trademarks and service marks. The Company believes that many of thesemarks, including its Kentucky Fried Chicken®, KFC®, Pizza Hut® and Taco Bell® marks, have significant value and are materiallyimportant to its business. The Company’s policy is to pursue registration of its important marks whenever feasible and to opposevigorously any infringement of its marks.

The use of these marks by franchisees and licensees has been authorized in our franchise and license agreements. Under current law andwith proper use, the Company’s rights in its marks can generally last indefinitely. The Company also has certain patents on restaurantequipment which, while valuable, are not material to its business.

Working Capital

Information about the Company’s working capital is included in MD&A in Part II, Item 7, pages 21 through 47 and the ConsolidatedStatements of Cash Flows in Part II, Item 8, page 51.

Customers

The Company’s business is not dependent upon a single customer or small group of customers.

Seasonal Operations

The Company does not consider its operations to be seasonal to any material degree.

Backlog Orders

Company restaurants have no backlog orders.

Government Contracts

No material portion of the Company’s business is subject to renegotiation of profits or termination of contracts or subcontracts at theelection of the U.S. government.

Competition

The retail food industry, in which our Concepts compete, is made up of supermarkets, supercenters, warehouse stores, convenience stores,coffee shops, snack bars, delicatessens and restaurants (including the QSR segment), and is intensely competitive with respect to food



quality, price, service, convenience, location and concept. The industry is often affected by changes in consumer tastes; national, regionalor local economic conditions; currency fluctuations; demographic trends; traffic patterns; the type, number

6



and location of competing food retailers and products; and disposable purchasing power. Each of the Concepts competes withinternational, national and regional restaurant chains as well as locally-owned restaurants, not only for customers, but also formanagement and hourly personnel, suitable real estate sites and qualified franchisees. Given the various types and vast number ofcompetitors, our Concepts do not constitute a significant portion of the retail food industry in terms of number of system units or systemsales, either on a worldwide or individual country basis.

Research and Development (“R&D”)

The Company’s subsidiaries operate R&D facilities in Shanghai, China (China Division); Dallas, Texas (Pizza Hut U.S. and YRI);Irvine, California (Taco Bell); Louisville, Kentucky (KFC U.S.) and several other locations outside the U.S. The Company expensed $34million, $33 million and $31 million in 2011, 2010 and 2009, respectively, for R&D activities. From time to time, independent suppliersalso conduct research and development activities for the benefit of the YUM system.

Environmental Matters

The Company is not aware of any federal, state or local environmental laws or regulations that will materially affect its earnings orcompetitive position, or result in material capital expenditures. However, the Company cannot predict the effect on its operations ofpossible future environmental legislation or regulations. During 2011, there were no material capital expenditures for environmentalcontrol facilities and no such material expenditures are anticipated.

Government Regulation

U.S. Division. The Company and its U.S. Division are subject to various federal, state and local laws affecting its business. Each of theConcepts’ restaurants in the U.S. must comply with licensing and regulation by a number of governmental authorities, which includehealth, sanitation, safety, fire and zoning agencies in the state and/or municipality in which the restaurant is located. In addition, eachConcept must comply with various state and federal laws that regulate the franchisor/franchisee relationship. To date, the Company hasnot been materially adversely affected by such licensing and regulation or by any difficulty, delay or failure to obtain required licenses orapprovals.

The Company and each Concept are also subject to federal and state laws governing such matters as immigration, employment and paypractices, overtime, tip credits and working conditions. The bulk of the Concepts’ employees are paid on an hourly basis at rates relatedto the federal and state minimum wages. The Company has not been materially adversely affected by such laws to date.

The Company and each Concept are also subject to federal and state child labor laws which, among other things, prohibit the use ofcertain “hazardous equipment” by employees younger than 18 years of age. The Company has not been materially adversely affected bysuch laws to date.

The Company and each Concept are also subject to laws relating to information security, privacy, cashless payments, and consumercredit, protection and fraud. The Company has not been materially adversely affected by such laws to date.

The Company and each Concept are also subject to laws relating to nutritional content, nutritional labeling, product safety and menulabeling. The Company has not been materially adversely affected by such laws to date.

The Company and each Concept, as applicable, continue to monitor their facilities for compliance with the Americans with DisabilitiesAct (“ADA”) in order to conform to its requirements. Under the ADA, the Company or the relevant Concept could be required to expendfunds to modify its restaurants to better provide service to, or make reasonable accommodation for the employment of, disabled persons.The Company has not been materially adversely affected by such laws to date.

International and China Divisions. The Company’s restaurants outside the U.S. are subject to national and local laws and regulationswhich are similar to those affecting U.S. restaurants, including laws and regulations concerning information security, labor, health,sanitation and safety. The restaurants outside the U.S. are also subject to tariffs and regulations on imported commodities and equipmentand laws regulating foreign investment. International compliance with environmental requirements has not had a material adverse effecton the Company’s results of operations, capital expenditures or competitive position.

See Item 1A "Risk Factors" on page 8 for a discussion of risks relating to federal, state, local and international regulation of ourbusiness.



7



Employees

As of year end 2011, the Company and its Concepts employed approximately 466,000 persons, approximately 87 percent of whomwere part-time. The Company believes that it provides working conditions and compensation that compare favorably with those of itsprincipal competitors. The majority of employees are paid on an hourly basis. Some employees are subject to labor council relationshipsthat vary due to the diverse cultures in which the Company operates. The Company and its Concepts consider their employee relationsto be good.

(d) Financial Information about Geographic Areas

Financial information about our significant geographic areas (China Division, International Division and U.S.) is incorporated herein byreference from Selected Financial Data in Part II, Item 6, pages 19 and 20; MD&A in Part II, Item 7, pages 21 through 47; and in therelated Consolidated Financial Statements in Part II, Item 8, pages 48 through 93.

(e) Available Information

The Company makes available through the Investor Relations section of its internet website at www.yum.com its annual report on Form10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after electronically filing such material with the Securities andExchange Commission ("SEC"). Our Corporate Governance Principles and our Code of Conduct are also located within this section ofthe website. The reference to the Company’s website address does not constitute incorporation by reference of the information containedon the website and should not be considered part of this document. These documents, as well as our SEC filings, are available in print toany shareholder who requests a copy from our Investor Relations Department.

Item 1A. Risk Factors.

You should carefully review the risks described below as they identify important factors that could cause our actual results to differmaterially from our forward-looking statements and historical trends.

Food safety and food-borne illness concerns may have an adverse effect on our business.

Food-borne illnesses, such as E. coli, hepatitis A, trichinosis or salmonella, and food safety issues have occurred in the past, andcould occur in the future. Any report or publicity linking us or one of our Concept restaurants, including restaurants operated by ourfranchisees, to instances of food-borne illness or other food safety issues, including food tampering or contamination, could adverselyaffect our Concepts’ brands and reputations as well as our revenues and profits. If a customer of our Concepts or franchisees becomesill from food-borne illnesses, we and our franchisees may temporarily close some restaurants, which would decrease our revenues. Inaddition, instances of food-borne illness, food tampering or food contamination solely involving our suppliers or distributors or solely atrestaurants of competitors could adversely affect our sales as a result of negative publicity about the foodservice industry generally. Suchinstances of food-borne illness, food tampering and food contamination may not be within our control. The occurrence of food-borneillnesses or food safety issues could also adversely affect the price and availability of affected ingredients, which could result indisruptions in our supply chain and/or lower margins for us and our franchisees.

Our China operations subject us to risks that could negatively affect our business.

A significant and growing portion of our restaurants are located in China. As a consequence, our financial results are increasinglydependent on our results in China, and our business is increasingly exposed to risks there. These risks include changes in economicconditions (including consumer spending, unemployment levels and wage and commodity inflation), income and non-income based taxrates and laws and consumer preferences, as well as changes in the regulatory environment and increased competition. In addition, ourresults of operations in China and the value of our Chinese assets are affected by fluctuations in currency exchange rates, which mayadversely affect reported earnings. There can be no assurance as to the future effect of any such changes on our results of operations,financial condition or cash flows.

In addition, any significant or prolonged deterioration in U.S.-China relations could adversely affect our China business. Certain risksand uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates the scopeof our foreign investments and business conducted within China. There are also uncertainties regarding the interpretation and application



of laws and regulations and the enforceability of intellectual property and contract rights in China. If we were unable to enforce ourintellectual property or contract rights in China, our business would be adversely impacted.

8



Our other foreign operations subject us to risks that could negatively affect our business.

A significant portion of our Concepts’ restaurants are operated in foreign countries and territories outside of the U.S. and China, andwe intend to continue expansion of our international operations. As a result, our business is increasingly exposed to risks inherent inforeign operations. These risks, which can vary substantially by country, include political instability, corruption, social and ethnic unrest,changes in economic conditions (including consumer spending, unemployment levels and wage and commodity inflation), the regulatoryenvironment, income and non-income based tax rates and laws and consumer preferences as well as changes in the laws and policies thatgovern foreign investment in countries where our restaurants are operated.

In addition, our results of operations and the value of our foreign assets are affected by fluctuations in currency exchange rates, whichmay adversely affect reported earnings. More specifically, an increase in the value of the United States Dollar relative to other currencies,such as the Australian Dollar, the British Pound, the Canadian Dollar and the Euro, could have an adverse effect on our reportedearnings. There can be no assurance as to the future effect of any such changes on our results of operations, financial condition or cashflows.

We may not attain our target development goals, and aggressive development could cannibalize existing sales.

Our growth strategy depends in large part on our ability to increase our net restaurant count in markets outside the United States,especially China and other emerging markets. The successful development of new units will depend in large part on our ability and theability of our franchisees to open new restaurants and to operate these restaurants on a profitable basis. We cannot guarantee that we,or our franchisees, will be able to achieve our expansion goals or that new restaurants will be operated profitably. Further, there is noassurance that any new restaurant will produce operating results similar to those of our existing restaurants. Other risks which couldimpact our ability to increase our net restaurant count include prevailing economic conditions and our, or our franchisees’, ability toobtain suitable restaurant locations, negotiate acceptable lease or purchase terms for the locations, obtain required permits and approvalsin a timely manner, hire and train qualified personnel and meet construction schedules.

Our franchisees also frequently depend upon financing from banks and other financial institutions in order to construct and open newrestaurants. If it becomes more difficult or expensive for our franchisees to obtain financing to develop new restaurants, our plannedgrowth could slow and our future revenue and operating cash flows could be adversely impacted.

In addition, the new restaurants could impact the sales of our existing restaurants nearby. It is not our intention to open new restaurantsthat materially cannibalize the sales of our existing restaurants. However, as with most growing retail and restaurant operations, there canbe no assurance that sales cannibalization will not occur or become more significant in the future as we increase our presence in existingmarkets.

Changes in commodity and other operating costs could adversely affect our results of operations.

Any increase in certain commodity prices, such as food, supply and energy costs, could adversely affect our operating results. Becauseour Concepts and their franchisees provide competitively priced food, our ability to pass along commodity price increases to ourcustomers is limited. Significant increases in gasoline prices could also result in a decrease of customer traffic at our restaurants or theimposition of fuel surcharges by our distributors, each of which could adversely affect our profit margins. Our operating expenses alsoinclude employee wages and benefits and insurance costs (including workers’ compensation, general liability, property and health) whichmay increase over time. Any such increase could adversely affect our profit margins.

Shortages or interruptions in the availability and delivery of food and other supplies may increase costs or reduce revenues.

The products sold by our Concepts and their franchisees are sourced from a wide variety of domestic and international suppliers. We arealso dependent upon third parties to make frequent deliveries of food products and supplies that meet our specifications at competitiveprices. Shortages or interruptions in the supply of food items and other supplies to our restaurants could adversely affect the availability,quality and cost of items we buy and the operations of our restaurants. Such shortages or disruptions could be caused by inclementweather, natural disasters such as floods, drought and hurricanes, increased demand, problems in production or distribution, the inabilityof our vendors to obtain credit, political instability in the countries in which foreign suppliers and distributors are located, the financialinstability of suppliers and distributors, suppliers' or distributors' failure to meet our standards, product quality issues, inflation, otherfactors relating to the suppliers and distributors and the countries in which they are located, food safety warnings or advisories or theprospect of such pronouncements or other conditions beyond our control. A shortage or interruption in the availability of certain foodproducts or supplies could increase costs and limit the availability of products critical to restaurant operations. In addition, failure by



a principal distributor for our Concepts and/or our franchisees to meet its service requirements could lead to a disruption of service orsupply until a new distributor is engaged, and any disruption could have an adverse effect on our business.

9



Our operating results are closely tied to the success of our Concepts’ franchisees.

A significant portion of our revenue consists of royalties from our franchisees. Because a significant and growing portion of ourrestaurants are run by franchisees, the success of our business is increasingly dependent upon the operational and financial success ofour franchisees. While our franchise agreements set forth certain operational standards and guidelines, we have limited control over howour franchisees’ businesses are run, and any significant inability of our franchisees to operate successfully could adversely affect ouroperating results through decreased royalty payments. For example, franchisees may not have access to the financial or managementresources that they need to open or continue operating the restaurants contemplated by their franchise agreements with us.

If our franchisees incur too much debt or if economic or sales trends deteriorate such that they are unable to repay existing debt, it couldresult in financial distress, including insolvency or bankruptcy. If a significant number of our franchisees become financially distressed,our operating results could be impacted through reduced or delayed royalty payments or increased rent obligations for leased propertieson which we are contingently liable.

Our results and financial condition could be affected by the success of our refranchising program.

We are in the process of refranchising restaurants in the U.S., which could reduce the percentage of Company ownership of KFCs, PizzaHuts, and Taco Bells in the U.S. from approximately 13% at the end of 2011 to approximately 8%. Our ability to execute this plan willdepend on, among other things, whether we receive fair offers for these restaurants, whether we can find suitable buyers and how quicklywe can consummate the sales. In addition, financing for restaurant purchases can be expensive or difficult to obtain. If buyers cannotobtain financing at attractive prices – or if they are unable to obtain financing at any price – our refranchising program could be delayed.

Once executed, the success of the refranchising program will depend on, among other things, buyers effectively operating theserestaurants, the impact of contingent liabilities incurred in connection with refranchising, and whether the resulting ownership mix ofCompany-operated and franchisee-operated restaurants allows us to meet our financial objectives. In addition, refranchising activitycould vary significantly from quarter-to-quarter and year-to-year and that volatility could impact our reported earnings.

We could be party to litigation that could adversely affect us by increasing our expenses or subjecting us to significant monetarydamages and other remedies.

We are involved in a number of legal proceedings, which include consumer, employment, tort and other litigation. We are currently adefendant in cases containing class action allegations in which the plaintiffs have brought claims under federal and state wage and hourand other laws. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate amounts, and the magnitude ofthe potential loss relating to such lawsuits may not be accurately estimated. Regardless of whether any claims against us are valid, orwhether we are ultimately held liable, such litigation may be expensive to defend and may divert resources away from our operationsand negatively impact reported earnings. With respect to insured claims, a judgment for monetary damages in excess of any insurancecoverage could adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegationsmay also adversely affect our reputation, which in turn could adversely affect our results.

In addition, the restaurant industry has been subject to claims that relate to the nutritional content of food products, as well as claims thatthe menus and practices of restaurant chains have led to the obesity of some customers. We may also be subject to this type of claim inthe future and, even if we are not, publicity about these matters (particularly directed at the quick service and fast-casual segments of theindustry) may harm our reputation and adversely affect our results.

Health concerns arising from outbreaks of viruses or other diseases may have an adverse effect on our business.

Asian and European countries have experienced outbreaks of Avian Flu, and some commentators have hypothesized that further outbreakscould occur and reach pandemic levels. Future outbreaks could adversely affect the price and availability of poultry and cause customersto eat less chicken. Widespread outbreaks could also affect our ability to attract and retain employees.

Furthermore, other viruses such as H1N1 or “swine flu” may be transmitted through human contact, and the risk of contracting virusescould cause employees or guests to avoid gathering in public places, which could adversely affect restaurant guest traffic or the abilityto adequately staff restaurants. We could also be adversely affected if jurisdictions in which we have restaurants impose mandatoryclosures, seek voluntary closures or impose restrictions on operations of restaurants. Even if such measures are not implemented and avirus or other disease does not spread significantly, the perceived risk of infection or significant health risk may affect our business.



10



Our success depends substantially on the value and perception of our brands.

Our success is dependent in large part upon our ability to maintain and enhance the value of our brands and our customers’ connection toour brands. Brand value is based in part on consumer perceptions on a variety of subjective qualities, and even isolated business incidentscan erode brand value and consumer trust, particularly if the incidents receive considerable publicity or result in litigation. For example,our brands could be damaged by claims or perceptions about the quality of our products regardless of whether such claims or perceptionsare accurate. Consumer demand for our products and our brand value could diminish significantly if any such incidents or other matterserode consumer confidence in us or our products, which would likely result in lower sales and, ultimately, profits.

Our business may be adversely impacted by general economic conditions.

Our results of operations are dependent upon discretionary spending by consumers, which may be affected by general economicconditions globally or in one or more of the markets we serve. Some of the factors that impact discretionary consumer spending includeunemployment, disposable income and consumer confidence. These and other macroeconomic factors could have an adverse effect onour sales mix, profitability or development plans, which could harm our financial condition and operating results.

The impact of potentially limited credit availability on third-party vendors such as our suppliers cannot be predicted. The inability of oursuppliers to access financing, or the insolvency of suppliers, could lead to disruptions in our supply chain which could adversely impactour sales, cost of sales and financial condition.

Changes in governmental regulations may adversely affect our business operations.

Our Concepts and their franchisees are subject to numerous laws and regulations around the world. Our restaurants are subject to stateand local licensing and regulation by health, sanitation, food, workplace safety, fire and other agencies. In addition, we face risks arisingfrom compliance with and enforcement of increasingly complex federal and state immigration laws and regulations in the U.S.

We are also subject to the Americans with Disabilities Act in the U.S. and similar state laws that give civil rights protections to individualswith disabilities in the context of employment, public accommodations and other areas. The expenses associated with any facilitiesmodifications required by these laws could be material. Our operations in the U.S. are also subject to the U.S. Fair Labor StandardsAct, which governs such matters as minimum wages, overtime and other working conditions, family leave mandates and a variety ofsimilar state laws that govern these and other employment law matters. The compliance costs associated with these laws and evolvingregulations could be substantial, and any failure or alleged failure to comply with these laws could lead to litigation, which could increaseour expenses and adversely affect our financial condition.

We also face risks from new or changing laws and regulations relating to nutritional content, nutritional labeling, product safety andmenu labeling. Compliance with these laws and regulations can be costly and can increase our exposure to litigation or governmentalinvestigations or proceedings. New or changing laws and regulations relating to union organizing rights and activities may impact ouroperations at the restaurant level and increase our cost of labor. In addition, we are subject to laws relating to information security,privacy, cashless payments and consumer credit, protection and fraud, and any failure or perceived failure to comply with those lawscould harm our reputation or lead to litigation, which could adversely affect our financial condition.

We are also subject to increasing environmental regulations, which could result in increased taxation or future restrictions on or increasesin costs associated with food and other restaurant supplies, transportation and utilities, any of which could decrease our operating profitsand/or necessitate future investments in our restaurant facilities and equipment to achieve compliance.

The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and theconsequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatoryor public policy issues, could increase our compliance and other costs of doing business and therefore have an adverse effect on our resultsof operations. Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, amongother things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance withthese laws and regulations could be costly and could increase our exposure to litigation or governmental investigations or proceedings.

11



Tax matters, including changes in tax rates, disagreements with taxing authorities and imposition of new taxes could impact theCompany's results of operations and financial condition.

A significant percentage of our profits are earned outside the U.S. and taxed at lower rates than the U.S. statutory rates. Historically, thecash we generate outside the U.S. has principally been used to fund our international development. However, if the cash generated byour U.S. business is not sufficient to meet the Company's need for cash in the U.S., we may need to repatriate a greater portion of ourinternational earnings to the U.S. in the future. Such international earnings would be subject to U.S. tax at the point in time we did notbelieve they were permanently invested outside the U.S. This could cause our worldwide effective tax rate to increase materially.

We are subject to income taxes as well as non-income based taxes, such as payroll, sales, use, value-added, net worth, property,withholding and franchise taxes in both the U.S. and various foreign jurisdictions. We are also subject to regular reviews, examinationsand audits by the Internal Revenue Service and other taxing authorities with respect to such income and non-income based taxes insideand outside of the U.S. Although we believe our tax estimates are reasonable, if the IRS or other taxing authority disagrees with thepositions we have taken, we could face additional tax liability, including interest and penalties. There can be no assurance that payment ofsuch additional amounts upon final adjudication of any disputes will not have a material impact on our results of operations and financialposition.

We are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations worldwide.Such changes could increase our taxes and have an adverse effect on our operating results and financial condition.

Failure to protect the integrity and security of individually identifiable data of our customers and employees could expose us to litigationand damage our reputation.

We receive and maintain certain personal information about our customers and employees. The use of this information by us isregulated by applicable law, as well as by certain third-party contracts. If our security and information systems are compromised orour business associates fail to comply with these laws and regulations and this information is obtained by unauthorized persons or usedinappropriately, it could adversely affect our reputation, as well as our restaurant operations and results of operations and financialcondition. Additionally, we could be subject to litigation or the imposition of penalties. As privacy and information security laws andregulations change, we may incur additional costs to ensure we remain in compliance.

The retail food industry in which we operate is highly competitive.

The retail food industry in which we operate is highly competitive with respect to price and quality of food products, new productdevelopment, price, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness andmaintenance of properties. If consumer or dietary preferences change, or our restaurants are unable to compete successfully with otherretail food outlets in new and existing markets, our business could be adversely affected. We also face growing competition as a resultof convergence in grocery, deli and restaurant services, including the offering by the grocery industry of convenient meals, includingpizzas and entrees with side dishes. In addition, in the retail food industry, labor is a primary operating cost component. Competition forqualified employees could also require us to pay higher wages to attract a sufficient number of employees, which could adversely impactour profit margins.

Item 1B. Unresolved Staff Comments.

The Company has received no written comments regarding its periodic or current reports from the staff of the Securities and ExchangeCommission that were issued 180 days or more preceding the end of its 2011 fiscal year and that remain unresolved.

Item 2. Properties.

As of year end 2011, the Company’s Concepts owned more than 1,200 units and leased land, building or both for nearly 6,200 unitsworldwide. These units are further detailed as follows:

• The China Division leased land, building or both in more than 3,700 units.

• The International Division owned approximately 400 units and leased land, building or both in nearly 1,200 units.

• The U.S. Division owned more than 800 units and leased land, building or both in nearly 1,300 units.



12



Company restaurants in China are generally leased for initial terms of 10 to 15 years and generally do not have renewaloptions. Historically, the Company has either been able to renew its China Division leases or enter into competitive leases at replacementsites without a significant impact on our operations, cash flows or capital resources. Company restaurants in the International Divisionwith leases have initial lease terms and renewal options that vary by country. Company restaurants in the U.S. with leases are generallyleased for initial terms of 15 or 20 years and generally have renewal options; however, Pizza Hut delivery/carryout units in the U.S.generally are leased for significantly shorter initial terms with shorter renewal options. The Company currently has approximately 800units worldwide that it leases or subleases to franchisees, principally in the U.S., U.K. and Mexico.

The China Division leases their corporate headquarters and research facilities in Shanghai, China. The Pizza Hut U.S. and YRI corporateheadquarters and a research facility in Dallas, Texas are owned by Pizza Hut. Taco Bell leases its corporate headquarters and researchfacility in Irvine, California. The KFC U.S. and YUM corporate headquarters and a research facility in Louisville, Kentucky are owned bythe Company. In addition, YUM leases office facilities for the U.S. Division shared service center in Louisville, Kentucky. Additionalinformation about the Company’s properties is included in the Consolidated Financial Statements in Part II, Item 8, pages 48 through 93.

The Company believes that its properties are generally in good operating condition and are suitable for the purposes for which they arebeing used.

Item 3. Legal Proceedings.

The Company is subject to various claims and contingencies related to lawsuits, real estate, environmental and other matters arisingin the normal course of business. The Company believes that the ultimate liability, if any, in excess of amounts already provided forthese matters in the Consolidated Financial Statements, is not likely to have a material adverse effect on the Company’s annual resultsof operations, financial condition or cash flows. The following is a brief description of the more significant of the categories of lawsuitsand other matters we face from time to time. Descriptions of specific claims and contingencies appear in Note 19, Contingencies, to theConsolidated Financial Statements included in Part II, Item 8.

Franchisees

A substantial number of the restaurants of each of the Concepts are franchised to independent businesses operating under arrangementswith the Concepts. In the course of the franchise relationship, occasional disputes arise between the Company and its Concepts’franchisees relating to a broad range of subjects, including, without limitation, marketing, operational standards, quality, service, andcleanliness issues, grants, transfers or terminations of franchise rights, territorial disputes and delinquent payments.

Suppliers

The Company purchases food, paper, equipment and other restaurant supplies from numerous independent suppliers throughout theworld. These suppliers are required to meet and maintain compliance with the Company’s standards and specifications. On occasion,disputes arise between the Company and its suppliers on a number of issues, including, but not limited to, compliance with productspecifications and terms of procurement and service requirements.

Employees

At any given time, the Company or its Concepts employ hundreds of thousands of persons, primarily in its restaurants. In addition, eachyear thousands of persons seek employment with the Company and its restaurants. From time to time, disputes arise regarding employeehiring, compensation, termination and promotion practices.

Like other retail employers, the Company has been faced in a few states with allegations of class-wide wage and hour, employeeclassification and other labor law violations.

Customers

The Company’s restaurants serve a large and diverse cross-section of the public and in the course of serving so many people, disputesarise regarding products, service, accidents and other matters typical of large restaurant systems such as those of the Company.

13



Intellectual Property

The Company has registered trademarks and service marks, many of which are of material importance to the Company’s business. Fromtime to time, the Company may become involved in litigation to defend and protect its use and ownership of its registered marks.

14



Item 4. Mine Safety Disclosures.

Not applicable

Executive Officers of the Registrant

The executive officers of the Company as of February 20, 2012, and their ages and current positions as of that date are as follows:

David C. Novak, 59, is Chairman of the Board, Chief Executive Officer and President of YUM. He has served in this position sinceJanuary 2001.

Jing-Shyh S. Su, 59, is Vice-Chairman of the Board of YUM and Chairman and Chief Executive Officer of YUM Restaurants China. Hehas served in this position since May 2010. He has served as Vice-Chairman of the Board of YUM since March 2008, and he served asPresident of YUM Restaurants China from 1997 to May 2010.

Scott O. Bergren, 65, is Chief Executive Officer of Pizza Hut U.S. and YUM Chief Innovation Officer. He has served in this positionsince February 2011. Prior to this position, Mr. Bergren served as President and Chief Concept Officer of Pizza Hut, a position he heldbeginning in November 2006. Mr. Bergren served as Chief Marketing Officer of KFC and YUM from August 2003 to November 2006.

Jonathan D. Blum, 53, is Senior Vice President and Chief Public Affairs Officer of YUM. He has served in this position since July1997.

Anne P. Byerlein, 53, is Chief People Officer of YUM. She has served in this position since December 2002.

Christian L. Campbell, 61, is Senior Vice President, General Counsel, Secretary and Chief Franchise Policy Officer of YUM. He hasserved as Senior Vice President, General Counsel and Secretary since September 1997 and Chief Franchise Policy Officer since January2003.

Richard T. Carucci, 54, is Chief Financial Officer of YUM. He has served in this position since March 2005. From October 2004 toFebruary 2005, he served as Senior Vice President, Finance and Chief Financial Officer - Designate of YUM.

Greg Creed, 54, is Chief Executive Officer of Taco Bell. He has served in this position since February 2011. Prior to this position, Mr.Creed served as President and Chief Concept Officer of Taco Bell, a position he held beginning in December 2006. Mr. Creed served asChief Operating Officer of YUM from December 2005 to November 2006.

Roger Eaton, 51, is YUM Chief Operations Officer. He has served in this position since November 2011. Prior to this position, Mr.Eaton served as Chief Executive Officer of KFC U.S. and YUM Operational Excellence Officer from February 2011 to November2011. He was President and Chief Concept Officer of KFC from June 2008 to February 2011. Mr. Eaton served as Chief Operatingand Development Officer of YUM from April 2008 to June 2008 and as Chief Operating and Development Officer - Designate fromJanuary 2008 until April 2008. From 2000 until January 2008, he was Senior Vice President/Managing Director of YUM RestaurantsInternational South Pacific.

Muktesh Pant, 57, is Chief Executive Officer of YRI. He has served in this position since December 2011. Prior to this position heserved as President of YRI from May 2010 to December 2011 and as President of Global Brand Building for YUM from February 2009 toDecember 2011. He served as the Chief Marketing Officer of YRI from July 2005 to May 2010. Mr. Pant was the Global Chief ConceptOfficer-YUM and President of Taco Bell International from February 2008 to January 2009. From December 2006 to January 2008 hewas the Chief Concept Officer of Taco Bell International.

David E. Russell, 42, is Vice President and Corporate Controller of YUM. He has served in this position since February 2011. FromNovember 2010 to February 2011, Mr. Russell served as Vice President, Controller-Designate. From January 2008 to November 2010,he served as Vice President and Assistant Controller and from 2005 to 2008 he served as Senior Director, Finance.

Executive officers are elected by and serve at the discretion of the Board of Directors.

15



PART II

Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases ofEquity Securities.

The Company’s Common Stock trades under the symbol YUM and is listed on the New York Stock Exchange (“NYSE”). The followingsets forth the high and low NYSE composite closing sale prices by quarter for the Company’s Common Stock and dividends per commonshare.

2011

Quarter High LowDividendsDeclared

DividendsPaid

First $ 52.85 $ 46.40 $ — $ 0.25Second 56.69 49.42 0.50 0.25Third 56.75 47.82 — 0.25Fourth 59.58 48.12 0.57 0.285

2010

Quarter High LowDividendsDeclared

DividendsPaid

First $ 38.64 $ 32.72 $ 0.21 $ 0.21Second 43.94 37.92 0.21 0.21Third 44.35 38.53 — 0.21Fourth 51.90 43.85 0.50 0.25

In 2011, the Company declared two cash dividends of $0.25 per share and two cash dividends of $0.285 per share of Common Stock, oneof which had a distribution date of February 3, 2012. In 2010, the Company declared two cash dividends of $0.21 per share and two cashdividends of $0.25 per share of Common Stock, one of which was paid in 2011. The Company is targeting an annual dividend payoutratio of 35% to 40% of net income.

As of February 14, 2012, there were 67,435 registered holders of record of the Company’s Common Stock.

The Company had no sales of unregistered securities during 2011, 2010 or 2009.

16



Issuer Purchases of Equity Securities

The following table provides information as of December 31, 2011 with respect to shares of Common Stock repurchased by the Companyduring the quarter then ended:

Fiscal Periods

Total numberof shares

purchased(thousands)Average pricepaid per share

Total number of sharespurchased as part of publicly

announced plans orprograms (thousands)

Approximate dollar value ofshares that may yet be

purchased under the plans orprograms (millions)

Period 10 647 $ 50.80 647 $ 3439/4/11 – 10/1/11Period 11 1,794 $ 49.73 1,794 $ 25310/2/11 – 10/29/11Period 12 753 $ 53.75 753 $ 96310/30/11 – 11/26/11Period 13 435 $ 56.93 435 $ 93811/27/11 – 12/31/11Total 3,629 $ 51.62 3,629 $ 938

On January 27, 2011, our Board of Directors authorized share repurchases through July 2012, of up to $750 million (excluding applicabletransaction fees) of our outstanding Common Stock. On November 18, 2011, our Board of Directors authorized additional sharerepurchases through May 2013 of up to $750 million (excluding applicable transaction fees) of our outstanding Common Stock. For thequarter ended December 31, 2011, all share repurchases were made pursuant to the January 2011 authorization.

17



Stock Performance Graph

This graph compares the cumulative total return of our Common Stock to the cumulative total return of the S&P 500 Stock Index andthe S&P 500 Consumer Discretionary Sector, a peer group that includes YUM, for the period from December 29, 2006 to December 30,2011, the last trading day of our 2011 fiscal year. The graph assumes that the value of the investment in our Common Stock and eachindex was $100 at December 29, 2006 and that all dividends were reinvested.

12/29/2006 12/28/2007 12/26/2008 12/24/2009 12/23/2010 12/30/2011YUM! $ 100 $ 133 $ 107 $ 128 $ 183 $ 222S&P 500 $ 100 $ 106 $ 64 $ 85 $ 97 $ 99S&P ConsumerDiscretionary $ 100 $ 87 $ 56 $ 83 $ 105 $ 111

18



Item 6. Selected Financial Data.Selected Financial DataYUM! Brands, Inc. and Subsidiaries(in millions, except per share and unit amounts)

Fiscal Year

2011 2010 2009 2008 2007

Summary of Operations

Revenues

Company sales $ 10,893 $ 9,783 $ 9,413 $ 9,843 $ 9,100

Franchise and license fees and income 1,733 1,560 1,423 1,461 1,335

Total 12,626 11,343 10,836 11,304 10,435

Closures and impairment income (expenses)(a) (135) (47) (103) (43) (35)

Refranchising gain (loss)(a) (72) (63) 26 5 11

Operating Profit(b) 1,815 1,769 1,590 1,517 1,357

Interest expense, net 156 175 194 226 166

Income before income taxes 1,659 1,594 1,396 1,291 1,191Net Income – including noncontrolling interest 1,335 1,178 1,083 972 909Net Income – YUM! Brands, Inc. 1,319 1,158 1,071 964 909

Basic earnings per common share 2.81 2.44 2.28 2.03 1.74

Diluted earnings per common share 2.74 2.38 2.22 1.96 1.68

Diluted earnings per common share before Special Items(c) 2.87 2.53 2.17 1.91 1.68

Cash Flow Data

Provided by operating activities $ 2,170 $ 1,968 $ 1,404 $ 1,521 $ 1,551

Capital spending, excluding acquisitions and investments 940 796 797 935 726

Proceeds from refranchising of restaurants 246 265 194 266 117

Repurchase shares of Common Stock 752 371 — 1,628 1,410

Dividends paid on Common Stock 481 412 362 322 273

Balance Sheet

Total assets $ 8,834 $ 8,316 $ 7,148 $ 6,527 $ 7,188

Long-term debt 2,997 2,915 3,207 3,564 2,924

Total debt 3,317 3,588 3,266 3,589 3,212

Other Data

Number of stores at year end

Company 7,437 7,271 7,666 7,568 7,625

Unconsolidated Affiliates 587 525 469 645 1,314

Franchisees(d) 26,928 27,852 26,745 25,911 24,297

Licensees 2,169 2,187 2,200 2,168 2,109

System(d) 37,121 37,835 37,080 36,292 35,345

China Division system sales growth(e)

Reported 35 % 18% 11 % 33% 34%

Local currency(f) 29 % 17% 10 % 22% 28%

YRI system sales growth(e)

Reported 13 % 10% (4)% 10% 15%

Local currency(f) 8 % 4% 5 % 8% 10%



U.S. same store sales growth(e) (1)% 1% (5)% 2% —%

Shares outstanding at year end 460 469 469 459 499

Cash dividends declared per Common Stock $ 1.07 $ 0.92 $ 0.80 $ 0.72 $ 0.45

Market price per share at year end $ 59.01 $ 49.66 $ 35.38 $ 30.28 $ 38.54

19



Fiscal year 2011 includes 53 weeks and fiscal years 2010, 2009, 2008 and 2007 include 52 weeks. See Management's Discussion andAnalysis of Financial Condition and Results of Operations ("MD&A") for discussion of the impact of the 53rd week in fiscal year 2011.

The selected financial data should be read in conjunction with the Consolidated Financial Statements.

(a) See Note 4 for discussion of Refranchising and Store Closure and Impairment Activity.

(b) Fiscal years 2011, 2010 and 2009 include the impact of Special Items described in further detail within our MD&A. Fiscal year2009 also included a non-cash charge of $12 million to write-off goodwill related to our Pizza Hut Korea business. Fiscal year2008 also included a pre-tax gain of $100 million related to the sale of our interest in our unconsolidated affiliate in Japan.

(c) In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) throughoutthis document, the Company has provided non-GAAP measurements which present operating results on a basis before SpecialItems. The Company uses earnings before Special Items as a key performance measure of results of operations for the purposeof evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financialresults in accordance with GAAP. Rather, the Company believes that the presentation of earnings before Special Items providesadditional information to investors to facilitate the comparison of past and present operations, excluding items that the Companydoes not believe are indicative of our ongoing operations due to their size and/or nature. The 2011, 2010 and 2009 Special Itemsare discussed in further detail within the MD&A.

(d) Franchisee and System units at 2011 reflect the LJS and A&W divestitures. See Restaurant Unit Activity within our MD&A forfurther detail.

(e) System sales growth includes the results of all restaurants regardless of ownership, including Company-owned, franchise,unconsolidated affiliate and license restaurants. Sales of franchise, unconsolidated affiliate and license restaurants generatefranchise and license fees for the Company (typically at a rate of 4% to 6% of sales). Franchise, unconsolidated affiliate andlicense restaurant sales are not included in Company sales on the Consolidated Statements of Income; however, the franchiseand license fees are included in the Company’s revenues. We believe system sales growth is useful to investors as a significantindicator of the overall strength of our business as it incorporates all our revenue drivers, Company and franchise same-storesales as well as net unit development. Same-store sales growth includes the estimated growth in sales of all restaurants that havebeen open one year or more.

(f) Local currency represents the percentage change excluding the impact of foreign currency translation. These amounts arederived by translating current year results at prior year average exchange rates. We believe the elimination of the foreigncurrency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

20



Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction and Overview

The following Management’s Discussion and Analysis (“MD&A”), should be read in conjunction with the Consolidated FinancialStatements on pages 48 through 93 (“Financial Statements”) and the Forward-Looking Statements on page 2 and the Risk Factors setforth in Item 1A. Throughout the MD&A, YUM! Brands, Inc. (“YUM” or the “Company”) makes reference to certain performancemeasures as described below.

• The Company provides the percentage changes excluding the impact of foreign currency translation (“FX” or “Forex”). Theseamounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the foreigncurrency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

• System sales growth includes the results of all restaurants regardless of ownership, including Company-owned, franchise,unconsolidated affiliate and license restaurants. Sales of franchise, unconsolidated affiliate and license restaurants generate franchiseand license fees for the Company (typically at a rate of 4% to 6% of sales). Franchise, unconsolidated affiliate and license restaurantsales are not included in Company sales on the Consolidated Statements of Income; however, the franchise and license fees areincluded in the Company’s revenues. We believe system sales growth is useful to investors as a significant indicator of the overallstrength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unitdevelopment.

• Same-store sales is the estimated growth in sales of all restaurants that have been open one year or more.

• Company restaurant profit is defined as Company sales less expenses incurred directly by our Company restaurants in generatingCompany sales. Company restaurant margin as a percentage of sales is defined as Company restaurant profit divided by Companysales.

• Operating margin is defined as Operating Profit divided by Total revenue.

All Note references herein refer to the Notes to the Financial Statements on pages 54 through 93. Tabular amounts are displayed inmillions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified.

Description of Business

YUM is the world’s largest restaurant company in terms of system restaurants with approximately 37,000 restaurants in more than120 countries and territories operating under the KFC, Pizza Hut or Taco Bell brands. In December of 2011 we sold our Long JohnSilver's ("LJS") and A&W All American Food Restaurants ("A&W") brands to key franchise leaders and strategic investors in separatetransactions. The results for these businesses through the sale dates are included in the Company's results for 2011, 2010 and 2009. TheCompany’s restaurant brands – KFC, Pizza Hut and Taco Bell – are the global leaders in the chicken, pizza and Mexican-style foodcategories, respectively. Of the approximately 37,000 restaurants, 20% are operated by the Company, 74% are operated by franchiseesand unconsolidated affiliates and 6% are operated by licensees.

YUM’s business consists of three reporting segments: China Division ("China"), YUM Restaurants International (“YRI” or“International Division”) and the United States. The China Division includes only mainland China, and YRI includes the remainder ofour international operations. The China Division, YRI and Taco Bell U.S. now represent approximately 90% of the Company’s operatingprofits, excluding Corporate and unallocated income and expenses.

Strategies

The Company continues to focus on four key strategies:

Build Leading Brands in China in Every Significant Category – The Company has developed the KFC and Pizza Hut brands into theleading quick service and casual dining restaurants, respectively, in mainland China. Additionally, the Company owns and operatesthe distribution system for its restaurants in China which we believe provides a significant competitive advantage. Given this strongcompetitive position, a growing economy and a population of 1.3 billion in mainland China, the Company is rapidly adding KFC and



Pizza Hut Casual Dining restaurants and testing the additional restaurant concepts of Pizza Hut Home Service (pizza delivery) and EastDawning (Chinese food). Additionally, on February 1, 2012 we acquired an additional 66% interest in

21



Little Sheep Group Ltd. ("Little Sheep"), a leading casual dining concept in China. This acquisition brought our total ownership toapproximately 93% of the business. Our ongoing earnings growth model in China includes double-digit percentage unit growth, systemsales growth of at least 13%, same-store sales growth of at least 5% and moderate leverage of our General and Administrative (“G&A”)infrastructure, which we expect to drive Operating Profit growth of 15%.

Drive Aggressive International Expansion and Build Strong Brands Everywhere – The Company and its franchisees opened over 900 newrestaurants in 2011 in the Company’s International Division, representing 12 straight years of opening over 700 restaurants, making YRIone of the leading international retail developers in terms of units opened. The Company expects to continue to experience strong growthby building out existing markets and growing in new markets including France, Germany, Russia and across Africa. The InternationalDivision’s Operating Profit has experienced a 9-year compound annual growth rate of 12%. Our ongoing earnings growth model for YRIincludes Operating Profit growth of 10% driven by 3-4% unit growth, system sales growth of 6%, at least 2-3% same-store sales growth,margin improvement and leverage of our G&A infrastructure.

Dramatically Improve U.S. Brand Positions, Consistency and Returns – The Company continues to focus on improving its U.S. positionthrough differentiated products and marketing and an improved customer experience. The Company also strives to provide industry-leading new product innovation which adds sales layers and expands day parts. We continue to evaluate our returns and ownershippositions with an earn-the-right-to-own philosophy on Company-owned restaurants. Our ongoing earnings growth model calls forOperating Profit growth of 5% in the U.S.

Drive Industry-Leading, Long-Term Shareholder and Franchisee Value – The Company is focused on delivering high returns andreturning substantial cash flows to its shareholders via dividends and share repurchases. The Company has one of the highest returnson invested capital in the Quick Service Restaurants (“QSR”) industry. The Company’s dividend and share repurchase programs havereturned over $2.1 billion and $6.7 billion to shareholders, respectively, since 2004. The Company is targeting an annual dividendpayout ratio of 35% to 40% of net income and has increased the quarterly dividend at a double-digit rate each year since inception in2004. Shares are repurchased opportunistically as part of our regular capital structure decisions.

The ongoing earnings growth rates referenced above represent our average annual expectations for the next several years. Details of our2012 Guidance by division as presented on December 7, 2011 can be found online at http://www.yum.com.

2011 Highlights

● Worldwide system sales grew 7% prior to foreign currency translation, including 29% in China and 8% at YRI. Systemsales in the U.S. were flat.

● Same-store sales grew 19% in China, 3% at YRI and declined 1% in the U.S.

● Record International development with 1,561 new restaurants including 656 in China and 905 at YRI.

● Worldwide operating profit grew 8%, including a positive impact from foreign currency translation of $77 million.Prior to foreign currency translation, operating profit grew 4%, including 15% in China and 9% at YRI, offsetting a12% decline in the U.S.

● Worldwide restaurant margin declined 0.9 points to 16.0%.

● Increased annual dividend rate to $1.14 per share and repurchased 14.3 million shares totaling $733 million at anaverage price of $51.

● Increased return on invested capital to over 22%

All preceding comparisons are versus the same period a year ago and exclude the impact of Special Items. See the Significant KnownEvents, Trends or Uncertainties Impacting or Expected to Impact Comparisons of Reported or Future Results section of this MD&A fora description of Special Items.



22



Results of Operations

Amount % B/(W)2011 2010 2009 2011 2010

Company sales $ 10,893 $ 9,783 $ 9,413 11 4Franchise and license fees and income 1,733 1,560 1,423 11 10

Total revenues $ 12,626 $ 11,343 $ 10,836 11 5

Company restaurant profit $ 1,753 $ 1,663 $ 1,479 6 12

% of Company sales 16.1% 17.0% 15.7% (0.9) ppts. 1.3 ppts.Operating Profit $ 1,815 $ 1,769 $ 1,590 3 11Interest expense, net 156 175 194 11 9Income tax provision 324 416 313 22 (33)Net Income – including noncontrolling interest 1,335 1,178 1,083 13 9Net Income – noncontrolling interest 16 20 12 18 (60)

Net Income – YUM! Brands, Inc. $ 1,319 $ 1,158 $ 1,071 14 8

Diluted EPS(a) $ 2.74 $ 2.38 $ 2.22 15 7

Diluted EPS before Special Items(a) $ 2.87 $ 2.53 $ 2.17 14 17

Reported Effective tax rate 19.5% 26.1% 22.4%

Effective tax rate before Special Items 24.2% 25.3% 23.1%

(a) See Note 3 for the number of shares used in these calculations.

Significant Known Events, Trends or Uncertainties Impacting or Expected to Impact Comparisons of Reported or Future Results

Special Items

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) above and throughoutthis document, the Company has provided non-GAAP measurements which present operating results in 2011, 2010 and 2009 on abasis before Special Items. Included in Special Items are the impact of measures we took to transform our U.S. business (“the U.S.business transformation measures”) including: U.S. refranchising gains (losses), the depreciation reduction arising from the impairmentof KFC restaurants we offered to sell in 2010 that remained Company restaurants for some or all of the periods presented, chargesrelating to U.S. G&A productivity initiatives and realignment of resources, investments in our U.S. Brands and a 2009 U.S. Goodwillimpairment charge. Special Items also include losses and other costs related to the LJS and A&W divestitures, the losses associated withrefranchising equity markets outside the U.S., the depreciation reduction from the impairment of Pizza Hut UK restaurants upon ourdecision to refranchise these restaurants in 2011 and the 2009 gain upon our acquisition of additional ownership in, and consolidation of,the operating entity that owns the KFCs in Shanghai, China. These amounts are further described below.

The Company uses earnings before Special Items as a key performance measure of results of operations for the purpose of evaluatingperformance internally, and Special Items are not included in our China, YRI or U.S. segment results. This non-GAAP measurementis not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that thepresentation of earnings before Special Items provides additional information to investors to facilitate the comparison of past and presentoperations, excluding items in 2011, 2010 and 2009 that the Company does not believe are indicative of our ongoing operations due totheir size and/or nature.

23



Year12/31/2011 12/25/2010 12/26/2009

Detail of Special ItemsU.S. Refranchising gain (loss) $ (17) $ (18) $ 34Depreciation reduction from KFC U.S. restaurants impaired upon offer tosell 10 9 —Charges relating to U.S. G&A productivity initiatives and realignment ofresources (21) (9) (16)Investments in our U.S. Brands — — (32)LJS and A&W Goodwill impairment charge — — (26)Losses and other costs relating to the LJS and A&W divestitures (86) — —Losses associated with refranchising equity markets outside the U.S. (76) (59) (10)Depreciation reduction from Pizza UK restaurants impaired upondecision to sell 3 — —Gain upon consolidation of a former unconsolidated affiliate in China — — 68Special Items Income (Expense) (187) (77) 18Tax Benefit (Expense) on Special Items(a) 123 7 5

Special Items Income (Expense), net of tax $ (64) $ (70) $ 23

Average diluted shares outstanding 481 486 483

Special Items diluted EPS $ (0.13) $ (0.15) $ 0.05Reconciliation of Operating Profit Before Special Items to ReportedOperating ProfitOperating Profit before Special Items $ 2,002 $ 1,846 $ 1,572Special Items Income (Expense) (187) (77) 18

Reported Operating Profit $ 1,815 $ 1,769 $ 1,590

Reconciliation of EPS Before Special Items to Reported EPSDiluted EPS before Special Items $ 2.87 $ 2.53 $ 2.17Special Items EPS (0.13) (0.15) 0.05

Reported EPS $ 2.74 $ 2.38 $ 2.22Reconciliation of Effective Tax Rate Before Special Items to ReportedEffective Tax RateEffective Tax Rate before Special Items 24.2 % 25.3% 23.1 %Impact on Tax Rate as a result of Special Items(a) (4.7)% 0.8% (0.7)%

Reported Effective Tax Rate 19.5 % 26.1% 22.4 %

(a) The tax benefit (expense) was determined based upon the impact of the nature, as well as the jurisdiction of the respectiveindividual components within Special Items.

U.S. Business Transformation

The U.S. business transformation measures in 2011, 2010 and 2009 included: continuation of our U.S. refranchising; G&A productivityinitiatives and realignment of resources (primarily severance and early retirement costs); a reduced emphasis on multi-branding as a long-term growth strategy; and investments in our U.S. Brands made on behalf of our franchisees such as equipment purchases.

In the years ended December 31, 2011 and December 25, 2010, we recorded pre-tax losses of $17 million and $18 million fromrefranchising in the U.S., respectively. In the year ended December 26, 2009, we recorded a pre-tax refranchising gain of $34 million in



the U.S. The losses recorded in the years ended December 31, 2011 and December 25, 2010 are primarily the net result of gains fromrestaurants sold and non-cash impairment charges related to our offers to refranchise restaurants in the U.S., principally a substantialportion of our Company-operated KFC restaurants. The non-cash impairment charges that we recorded related to our offers to refranchisethese Company-operated KFC restaurants in the U.S. decreased depreciation expense versus what we would have otherwise recorded by$10 million and $9 million in the years ended December 31, 2011 and December 25, 2010, respectively. This depreciation reduction wasrecorded as a Special Item, resulting in depreciation expense in the U.S. segment

24



results continuing to be recorded at the rate at which it was prior to the impairment charges being recorded for these restaurants.Refranchising gains and losses are more fully discussed in Note 4 and the Store Portfolio Strategy Section of the MD&A.

In connection with our G&A productivity initiatives and realignment of resources (primarily severance and early retirement costs), werecorded pre-tax charges of $21 million, $9 million and $16 million in the years ended December 31, 2011, December 25, 2010 andDecember 26, 2009, respectively.

As a result of a decline in future profit expectations for our LJS and A&W U.S. businesses due in part to the impact of a reduced emphasison multi-branding, we recorded a non-cash charge of $26 million, which resulted in no related income tax benefit, in Closures andimpairment expenses in the fourth quarter of 2009 to write-off goodwill associated with our LJS and A&W U.S. businesses we owned atthe time.

Additionally, the Company recognized a reduction to Franchise and license fees and income of $32 million, pre-tax, in the year endedDecember 26, 2009 related to investments in our U.S. Brands. These investments reflected our reimbursements to KFC franchisees forinstallation costs of ovens for the national launch of Kentucky Grilled Chicken. The reimbursements were recorded as a reduction toFranchise and license fees and income as we would not have provided the reimbursements absent the ongoing franchisee relationship.

LJS and A&W Divestitures

During the fourth quarter of 2011 we sold the Long John Silver's and A&W All American Food Restaurants brands to key franchiseleaders and strategic investors in separate transactions.

We recognized $86 million of pre-tax losses and other costs primarily in Closures and impairment (income) expenses during 2011 as aresult of these transactions. Additionally, we recognized $104 million of tax benefits related to tax losses associated with the transactions.

In 2011, these businesses contributed 5% to both System sales and Franchise and license fees and income for the U.S. segment, and 1%to both System sales and Franchise and license fees and income for the YRI segment. While these businesses contributed 1% to both theU.S. and YRI segments' Operating Profit in 2011, the impact on our consolidated Operating Profit was not significant.

Refranchising of Equity Markets Outside the U.S.

During the year ended December 31, 2011, we decided to refranchise or close all of our remaining Company-operated Pizza Hutrestaurants in the UK market. While an asset group comprising approximately 350 dine-in restaurants did not meet the criteria for held-for-sale classification as of December 31, 2011, our decision to sell was considered an impairment indicator. As such we reviewedthis asset group for potential impairment and determined that its carrying value was not recoverable based upon our estimate ofexpected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as companyunits. Accordingly, we wrote this asset group down to our estimate of its fair value, which is based on the sales price we would expectto receive from a buyer. This fair value determination considered current market conditions, trends in the Pizza Hut UK business, andprices for similar transactions in the restaurant industry and resulted in a pre-tax, non-cash write-down of $74 million which was recordedto Refranchising (gain) loss. This impairment charge decreased depreciation expense versus what would have otherwise been recordedby approximately $3 million in 2011. This depreciation reduction was recorded as a Special Item, resulting in depreciation expense inthe YRI segment results continuing to be recorded at the rate at which it was prior to the impairment charges being recorded for theserestaurants. We will continue to review the asset group for any further necessary impairment until the date it is sold. The write-downdoes not include any allocation of the Pizza Hut UK reporting unit goodwill in the asset group carrying value. This additional non-cashwrite-down would be recorded, consistent with our historical policy, if the asset group ultimately meets the criteria to be classified asheld for sale. Upon the ultimate sale of the restaurants, depending on the form of the transaction, we could also be required to record acharge for the fair value of any guarantee of future lease payments for any leases we assign to a franchisee and for the cumulative foreigncurrency translation adjustment associated with Pizza Hut UK. The decision to refranchise or close all remaining Pizza Hut restaurantsin the UK was considered to be a goodwill impairment indicator. We determined that the fair value of our Pizza Hut UK reporting unitexceeded its carrying value and as such there was no impairment of the approximately $100 million in goodwill attributable to thisreporting unit. We also recorded a $2 million loss in Refranchising (gain) loss for obligations that we believe are probable related to theproposed refranchising of Pizza Hut UK.

In the fourth quarter of 2010 we recorded a $52 million loss on the refranchising of our Mexico equity market as we sold all of ourCompany-operated restaurants, comprised of 222 KFC and 123 Pizza Huts, to an existing Latin American franchise partner. The buyeris also serving as the master franchisee for Mexico which had 102 KFCs and 53 Pizza Hut franchise restaurants at the time



25



of the transaction. The write-off of goodwill included in this loss was minimal as our Mexico reporting unit included an insignificantamount of goodwill. This loss did not result in a related income tax benefit.

During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as a result of our decision to offerto refranchise our KFC Taiwan equity market. During the year ended December 25, 2010 we refranchised all of our remaining companyrestaurants in Taiwan, which consisted of 124 KFCs. We included in our December 25, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a related incometax benefit. The amount of goodwill write-off was based on the relative fair values of the Taiwan business disposed of and the portionof the business that was retained. The fair value of the business disposed of was determined by reference to the discounted value ofthe future cash flows expected to be generated by the restaurants and retained by the franchisee, which included a deduction for theanticipated royalties the franchisee was estimated to pay the Company associated with the franchise agreement entered into in connectionwith this refranchising transaction. The fair value of the Taiwan business retained consisted of expected net cash flows to be derivedfrom royalties from franchisees, including the royalties associated with the franchise agreement entered into in connection with thisrefranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchisingwere substantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, wasdetermined not to be impaired subsequent to the refranchising as the fair value of the Taiwan reporting unit exceeded its carrying amount.

Consolidation of a Former Unconsolidated Affiliate in Shanghai, China

On May 4, 2009 we acquired an additional 7% ownership in the entity that operates more than 200 KFCs in Shanghai, China for$12 million, increasing our ownership to 58%. Prior to our acquisition of this additional interest, this entity was accounted for asan unconsolidated affiliate under the equity method of accounting. Concurrent with the acquisition we received additional rights inthe governance of the entity and thus we began consolidating the entity upon acquisition. As required by GAAP, we remeasured ourpreviously held 51% ownership in the entity, which had a recorded value of $17 million at the date of acquisition, at fair value andrecognized a gain of $68 million accordingly. This gain, which resulted in no related income tax expense, was recorded in Other (income)expense in our 2009 Consolidated Statement of Income.

Under the equity method of accounting, we previously reported our 51% share of the net income of the unconsolidated affiliate (afterinterest expense and income taxes) as Other (income) expense in the Consolidated Statements of Income. We also recorded a franchisefee for the royalty received from the restaurants owned by the unconsolidated affiliate. Subsequent to the date of the acquisition, wereported the results of operations for the entity in the appropriate line items of our Consolidated Statements of Income. We no longerrecorded franchise fee income for these restaurants nor did we report Other (income) expense as we did under the equity method ofaccounting. Net income attributable to our partner’s ownership percentage is recorded in Net Income – noncontrolling interests. For theyear ended December 25, 2010, the consolidation of the existing restaurants upon acquisition increased Company sales by $98 million,decreased Franchise and license fees and income by $6 million and increased Operating Profit by $3 million versus the year endedDecember 26, 2009. The impact of the acquisition on Net Income – YUM! Brands, Inc. was not significant to the year ended December25, 2010.

Extra Week in 2011

Our fiscal calendar results in a 53rd week every five or six years. Fiscal year 2011 included a 53rd week in the fourth quarter for all ourU.S. businesses and certain of our YRI businesses that report on a period, as opposed to a monthly, basis. Our China Division reports ona monthly basis and thus did not have a 53rd week.

See the System Sales Growth section within our MD&A for further discussion on the impact of 53rd week on system sales. The followingtable summarizes the estimated impact of the 53rd week on revenues and operating profit:

26



U.S. YRI Unallocated TotalRevenuesCompany sales $ 43 $ 29 $ — $ 72Franchise and license fees 13 6 — 19

Total Revenues $ 56 $ 35 $ — $ 91Operating profitFranchise and license fees $ 13 $ 6 $ — $ 19Restaurant profit 9 6 — 15General and administrative expenses (4) (4) (1) (9)

Operating profit(a) $ 18 $ 8 $ (1) $ 25

(a) The $25 million benefit was offset throughout 2011 by investments, including franchise development incentives, as well ashigher-than-normal spending, such as restaurant closures in the U.S. and YRI.

Acquisition of Controlling Interest in Little Sheep

On February 1, 2012 we paid $584 million to acquire an additional 66% interest in Little Sheep, a leading Chinese casual dining conceptwith approximately 450 system-wide restaurants headquartered in Inner Mongolia, China. This acquisition brought our total ownershipto approximately 93% of the business. We expect that the consolidation of Little Sheep will increase our revenue in China in 2012 byapproximately 5%, with only a corresponding modest impact to Operating profit given the transaction and transition related costs weexpect to incur in our initial year of ownership.

YRI Acquisitions

On October 31, 2011 YRI acquired 68 KFC restaurants from an existing franchisee in South Africa for $71 million.

On July 1, 2010, we completed the exercise of our option with our Russian partner to purchase their interest in the co-branded Rostik’s-KFC restaurants across Russia and the Commonwealth of Independent States. As a result, we acquired company ownership of 50restaurants and gained full rights and responsibilities as franchisor of 81 restaurants, which our partner previously managed as masterfranchisee. We paid cash of $60 million, net of settlement of a long-term note receivable of $11 million, and assumed long-term debtof $10 million which was subsequently repaid. The remaining balance of the purchase price of $12 million will be paid in cash by July2012.

The impact of consolidating these businesses on all line-items within our Consolidated Statement of Income was insignificant to thecomparison of our year-over-year results and is not expected to materially impact our results going forward.

Pizza Hut South Korea Goodwill Impairment

As a result of a decline in future profit expectations for our Pizza Hut South Korea business, we recorded a goodwill impairment chargeof $12 million for this market during 2009. This charge was recorded in Closure and impairment (income) expenses in our ConsolidatedStatement of Income and was allocated to our International Division for performance reporting purposes.

Store Portfolio Strategy

From time to time we sell Company restaurants to existing and new franchisees where geographic synergies can be obtained or wherefranchisees’ expertise can generally be leveraged to improve our overall operating performance, while retaining Company ownershipof strategic U.S. and international markets in which we choose to continue investing capital. In the U.S., we are targeting Companyownership of KFC, Pizza Hut and Taco Bell restaurants of about 8%, down from its current level of 13%, with our primary remainingfocus being refranchising at KFC and Taco Bell to about 5% and 16% Company ownership, respectively. Consistent with thisstrategy, 404, 404 and 541 Company restaurants in the U.S. were sold to franchisees in the years ended December 31, 2011, December25, 2010 and December 26, 2009, respectively. At December 31, 2011, we have offered for refranchising approximately 250 KFCsin the U.S. Additionally, we have offered for refranchise all remaining Company-owned restaurants in the Pizza Hut UK business



(approximately 420 restaurants remaining as of December 31, 2011) and during 2010, we refranchised all Company-owned KFCs andPizza Huts in Mexico (345 restaurants) and KFCs in Taiwan (124 restaurants).

27



The following table summarizes our worldwide refranchising activities:

2011 2010 2009Number of units refranchised 529 949 613Refranchising proceeds, pre-tax $ 246 $ 265 $ 194Refranchising (gain) loss, pre-tax $ 72 $ 63 $ (26)

Refranchisings reduce our reported revenues and restaurant profits and increase the importance of system sales growth as a keyperformance measure. Additionally, G&A expenses will decline over time as a result of these refranchising activities. The timing ofG&A declines will vary and often lag the actual refranchising activities as the synergies are typically dependent upon the size andgeography of the respective deals. G&A expenses included in the tables below reflect only direct G&A that we no longer incurred as aresult of stores that were operated by us for all or a portion of the respective previous year and were no longer operated by us as of thelast day of the respective current year.

The impact on Operating Profit arising from refranchising is the net of (a) the estimated reductions in restaurant profit, whichreflects the decrease in Company sales, and G&A expenses and (b) the increase in franchise fees from the restaurants that have beenrefranchised. The tables presented below reflect the impacts on Total revenues and on Operating Profit from stores that were operated byus for all or some portion of the respective previous year and were no longer operated by us as of the last day of the respective currentyear. In these tables, Decreased Company sales and Decreased Restaurant profit represents the amount of sales or restaurant profit earnedby the refranchised restaurants during the period we owned them in the prior year but did not own them in the current year. IncreasedFranchise and license fees represents the franchise and license fees from the refranchised restaurants that were recorded by the Companyin the current year during periods in which the restaurants were Company stores in the prior year.

The following table summarizes the impact of refranchising on Total revenues as described above:

2011China YRI U.S. Worldwide

Decreased Company sales $ (36) $ (311) $ (404) $ (751)Increased Franchise and license fees and income 6 25 27 58

Decrease in Total revenues $ (30) $ (286) $ (377) $ (693)


Decreased Company sales $ (20) $ (183) $ (401) $ (604)Increased Franchise and license fees and income 3 9 25 37

Decrease in Total revenues $ (17) $ (174) $ (376) $ (567)

The following table summarizes the impact of refranchising on Operating Profit as described above:


Decreased Restaurant profit $ (5) $ (25) $ (43) $ (73)Increased Franchise and license fees and income 6 25 27 58Increased Franchise and license expenses (2) (2) (2) (6)Decreased G&A — 21 6 27

Increase (decrease) in Operating Profit $ (1) $ 19 $ (12) $ 6

28




Decreased Restaurant profit $ (3) $ (5) $ (44) $ (52)Increased Franchise and license fees and income 3 9 25 37Increased Franchise and license expenses — — — —Decreased G&A — 9 6 15

Increase (decrease) in Operating Profit $ — $ 13 $ (13) $ —

Internal Revenue Service Proposed Adjustment

On June 23, 2010 the Company received a Revenue Agent Report from the Internal Revenue Service (the “IRS”) relating to itsexamination of our U.S. federal income tax returns for fiscal years 2004 through 2006. The IRS has proposed an adjustment toincrease the taxable value of rights to intangibles used outside the U.S. that YUM transferred to certain of its foreign subsidiaries. Theproposed adjustment would result in approximately $700 million of additional taxes plus net interest to date of approximately $170million. Furthermore, if the IRS prevails it is likely to make similar claims for years subsequent to fiscal 2006. The potential additionaltaxes for these later years, through 2011, computed on a similar basis to the 2004-2006 additional taxes, would be approximately $350million plus net interest to date of approximately $25 million.

We believe that the Company has properly reported taxable income and paid taxes in accordance with applicable laws and that theproposed adjustment is inconsistent with applicable income tax laws, Treasury Regulations and relevant case law. We intend to defendour position vigorously and have filed a protest with the IRS. As the final resolution of the proposed adjustment remains uncertain, theCompany will continue to provide for its position in accordance with GAAP. There can be no assurance that payments due upon finalresolution of this issue will not exceed our currently recorded reserve and such payments could have a material adverse effect on ourfinancial position. Additionally, if increases to our reserves are deemed necessary due to future developments related to this issue, suchincreases could have a material, adverse effect on our results of operations as they are recorded. The Company does not expect resolutionof this matter within twelve months and cannot predict with certainty the timing of such resolution.

International Reporting Change

In the first quarter of 2012, we will begin reporting information for our India business as a standalone reporting segment separate fromYRI as a result of changes to our management reporting structure. While our consolidated results will not be impacted, we will restateour historical segment information during 2012 for consistent presentation. This new segment will also include the franchise businessesin the neighboring countries of Bangladesh, Mauritius, Nepal and Sri Lanka.

29



Restaurant Unit Activity

Worldwide Franchisees Company Unconsolidated Affiliates Total Excluding Licensees(a)

Balance at end of 2009 26,745 7,666 469 34,880New Builds 952 607 62 1,621Acquisitions (110) 110 — —Refranchising 949 (949) — —Closures (668) (163) (6) (837)Other (16) — — (16)Balance at end of 2010 27,852 7,271 525 35,648

New Builds 1,058 749 73 1,880Acquisitions (137) 137 — —Refranchising 529 (529) — —Closures (743) (191) (11) (945)LJS & A&W Divestitures(b) (1,633) — — (1,633)Other 2 — — 2

Balance at end of 2011 26,928 7,437 587 34,952

% of Total 77% 21% 2% 100%

China Franchisees Company Unconsolidated Affiliates Total Excluding Licensees(a)

Balance at end of 2009 118 2,866 469 3,453New Builds 3 442 62 507Acquisitions — — — —Refranchising 33 (33) — —Closures (1) (47) (6) (54)Other — — — —Balance at end of 2010 153 3,228 525 3,906New Builds 4 579 73 656Acquisitions — — — —Refranchising 47 (47) — —Closures (3) (55) (11) (69)Other — — — —

Balance at end of 2011 201 3,705 587 4,493

% of Total 4% 83% 13% 100%

30



YRI Franchisees Company Unconsolidated Affiliates Total Excluding Licensees(a)

Balance at end of 2009 11,808 2,000 — 13,808New Builds 801 83 — 884Acquisitions (53) 53 — —Refranchising 512 (512) — —Closures (346) (65) — (411)Other — — — —Balance at end of 2010 12,722 1,559 — 14,281

New Builds 823 82 — 905Acquisitions (86) 86 — —Refranchising 78 (78) — —Closures (333) (56) — (389)LJS & A&W Divestitures(b) (347) — — (347)Other 3 — — 3

Balance at end of 2011 12,860 1,593 — 14,453

% of Total 89% 11% —% 100%

U.S. Franchisees Company Unconsolidated Affiliates Total Excluding Licensees(a)

Balance at end of 2009 14,819 2,800 — 17,619New Builds 148 82 — 230Acquisitions (57) 57 — —Refranchising 404 (404) — —Closures (321) (51) — (372)Other (16) — — (16)Balance at end of 2010 14,977 2,484 — 17,461

New Builds 231 88 — 319Acquisitions (51) 51 — —Refranchising 404 (404) — —Closures (407) (80) — (487)LJS & A&W Divestitures(b) (1,286) — — (1,286)Other (1) — — (1)

Balance at end of 2011 13,867 2,139 — 16,006

% of Total 87% 13% —% 100%

(a) The Worldwide, YRI and U.S. totals exclude 2,169, 125 and 2,044 licensed units, respectively, at December 31, 2011. Whilethere are no licensed units in China, we have excluded from the Worldwide and China totals 7 Company-owned units that aresimilar to licensed units. The units excluded offer limited menus and operate in non-traditional locations like malls, airports,gasoline service stations, train stations, subways, convenience stores, stadiums and amusement parks where a full scaletraditional outlet would not be practical or efficient. As licensed units have lower average unit sales volumes than ourtraditional units and our current strategy does not place a significant emphasis on expanding our licensed units, we do notbelieve that providing further detail of licensed unit activity provides significant or meaningful information at this time.



(b) The reductions to Worldwide, YRI and U.S. totals of 1,633, 347 and 1,286, respectively during 2011 represent the number ofLJS and A&W units as of the beginning of 2011. Therefore, 2011 New Builds and Closures exclude any activity related to LJSand A&W.

31



Multibrand restaurants are included in the totals above. Multibrand conversions increase the sales and points of distribution for thesecond brand added to a restaurant but do not result in an additional unit count. Similarly, a new multibrand restaurant, while increasingsales and points of distribution for two brands, results in just one additional unit count.

System Sales Growth

The following tables detail the key drivers of system sales growth for each reportable segment by year. Net unit growth represents the netimpact of actual system sales growth due to new unit openings and historical system sales lost due to closures as well as any necessaryrounding.

2011 vs. 2010China YRI U.S. Worldwide

Same store sales growth (decline) 19% 3% (1)% 3%Net unit growth and other 10 4 (1) 3Foreign currency translation 6 5 N/A 353rd week impact N/A 1 2 1

% Change 35% 13% — % 10%

% Change, excluding forex and 53rd week 29% 7% (2)% 6%

2010 vs. 2009China YRI U.S. Worldwide

Same store sales growth (decline) 6% —% 1 % 2%Net unit growth and other 11 4 1 2Foreign currency translation 1 6 N/A 3

% Change 18% 10% 2 % 7%

% Change, excluding forex 17% 4% N/A 4%

Company-Operated Store Results

The following tables detail the key drivers of the year-over-year changes of Company sales and Restaurant profit for each reportablesegment by year. Store portfolio actions represent the net impact of new unit openings, acquisitions, refranchisings and store closures onCompany sales or Restaurant profit. The impact of new unit openings and acquisitions represent the actual Company sales or Restaurantprofit for the periods the Company operated the restaurants in the current year but did not operate them in the prior year. The impactof refranchisings and store closures represent the actual Company sales or Restaurant profit for the periods in the prior year while theCompany operated the restaurants but did not operate them in the current year.

The dollar changes in Company Restaurant profit by year were as follows:

China2011 vs. 2010

Income / (Expense)

2010

StorePortfolioActions Other FX 2011

Company sales $ 4,081 $436 $ 720 $ 250 $ 5,487Cost of sales (1,362) (150) (346) (89) (1,947)Cost of labor (587) (96) (166) (41) (890)Occupancy and other (1,231) (159) (107) (71) (1,568)



Restaurant profit $ 901 $31 $ 101 $ 49 $ 1,082

Restaurant margin 22.1% 19.7%

32



2010 vs. 2009Income / (Expense)

2009


Company sales $ 3,352 $ 484 $ 207 $ 38 $ 4,081Cost of sales (1,175) (162) (12) (13) (1,362)Cost of labor (447) (78) (56) (6) (587)Occupancy and other (1,025) (160) (35) (11) (1,231)

Restaurant profit $ 705 $ 84 $ 104 $ 8 $ 901


In 2011, the increase in China Company sales and Restaurant profit associated with store portfolio actions was primarily driven by thedevelopment of new units partially offset by lapping the benefit of our participation in the World Expo in 2010. Significant other factorsimpacting Company sales and/or Restaurant profit were Company same-store sales growth of 18% which was driven by transactiongrowth partially offset by a negative impact from sales mix shift and a new business tax that took effect December 2010, wage rateinflation of 20% as well as commodity inflation of $90 million, or 8%.

In 2010, the increase in China Company sales and Restaurant profit associated with store portfolio actions was primarily driven by thedevelopment of new units and the acquisition of additional interest in and consolidation of a former China unconsolidated affiliate during2009 (See Note 4 for further discussion) and $16 million in Restaurant profit from our brands’ participation in the World Expo during2010. Significant other factors impacting Company sales and/or Restaurant profit were Company same-store sales growth of 6% andcommodity deflation of $26 million partially offset by labor inflation.

YRI2011 vs. 2010

Income / (Expense)

2010

StorePortfolioActions Other FX 53rd Week 2011

Company sales $ 2,347 $ (148) $ 62 $ 116 $ 29 $ 2,406Cost of sales (753) 67 (36) (38) (9) (769)Cost of labor (591) 34 (21) (30) (8) (616)Occupancy and other (727) 49 (9) (33) (6) (726)

Restaurant profit $ 276 $ 2 $ (4) $ 15 $ 6 $ 295


2010 vs. 2009

Income / (Expense) 2009


Company sales $ 2,323 $ (49) $ (10) $ 83 $ 2,347Cost of sales (758) 19 17 (31) (753)Cost of labor (586) 20 (8) (17) (591)Occupancy and other (724) 21 — (24) (727)

Restaurant profit $ 255 $ 11 $ (1) $ 11 $ 276




33



In 2011, the decrease in YRI Company sales associated with store portfolio actions was driven by refranchising, primarily Mexico,partially offset by new unit development. Significant other factors impacting Company sales and/or Restaurant profit were Companysame-store sales growth of 3% offset by commodity inflation and higher labor costs.

In 2010, the decrease in YRI Company sales associated with store portfolio actions was driven by refranchising, primarily KFC Taiwan,partially offset by new unit development. The increase in Restaurant profit associated with store portfolio actions was driven by newunit development partially offset by refranchising. Another significant factor impacting Restaurant profit during the year was laborinflation. Company same-store sales were flat for the year.

U.S.2011 vs. 2010

Income / (Expense)

2010

StorePortfolioActions Other FX 53rd Week 2011

Company sales $ 3,355 $ (322) $ (76) N/A $ 43 $ 3,000Cost of sales (976) 95 (23) N/A (13) (917)Cost of labor (994) 101 (7) N/A (12) (912)Occupancy and other (908) 95 13 N/A (9) (809)

Restaurant profit $ 477 $ (31) $ (93) N/A $ 9 $ 362


2010 vs. 2009Income / (Expense)

2009


Company sales $ 3,738 $ (378) $ (5) N/A $ 3,355Cost of sales (1,070) 103 (9) N/A (976)Cost of labor (1,121) 126 1 N/A (994)Occupancy and other (1,028) 115 5 N/A (908)

Restaurant profit $ 519 $ (34) $ (8) N/A $ 477


In 2011, the decrease in U.S. Company sales and Restaurant profit associated with store portfolio actions was primarily driven byrefranchising. Significant other factors impacting Company sales and/or Restaurant profit were commodity inflation of $55 million, or6%, Company same-store sales declines of 3%, including a negative impact from sales mix shift, and higher self-insurance costs.

In 2010, the decrease in U.S. Company sales and Restaurant profit associated with store portfolio actions was primarily driven byrefranchising. Other significant factors impacting Restaurant profit were a negative impact from sales mix shift, partially offset bycommodity deflation of $7 million. Company same-store sales were flat for the year.

34



Franchise and license fees and income

Amount% Increase(Decrease)

% Increase(Decrease) excluding

foreign currencytranslation

% Increase(Decrease) excluding


and 53rd week2011 2010 2009 2011 2010 2011 2010 2011

China $ 79 $ 54 $ 55 45 — 38 (1) 38YRI 868 741 665 17 11 12 6 11U.S. 786 765 735 3 4 N/A N/A 1Unallocated — — (32) — NM N/A N/A N/A

Worldwide $ 1,733 $ 1,560 $ 1,423 11 10 8 7 7

China Franchise and license fees and income for 2011 was positively impacted by 12% due to the impact of refranchising. Excluding theeffects of refranchising and foreign currency translation, the increase was driven by same-store sales and new unit development. ChinaFranchise and license fees and income for 2010 was negatively impacted by 10% related to the acquisition of additional interest in, andconsolidation of, an entity that operated the KFCs in Shanghai, China during 2009. See Note 4.

YRI Franchise and license fees and income for 2011 was positively impacted by 3% due to the effects of refranchising. Excluding theeffects of refranchising, 53rd week and foreign currency translation, the increase was driven by net new unit development and same-storesales. YRI Franchise and license fees and income for 2010 was positively impacted by 1% due to the impact of refranchising. Excludingthe impacts of refranchising and foreign currency translation, the increase was driven by net new unit development.

U.S. Franchise and license fees and income for 2011 was positively impacted by 3% due to the effects of refranchising. Excluding theeffects of refranchising and 53rd week, the remaining decrease was driven by store closures and same-store sales declines, partially offsetby new unit development. U.S. Franchise and license fees and income for 2010 was positively impacted by 3% due to the impact ofrefranchising. Excluding the impact of refranchising, the increase was driven by same-store sales, partially offset by store closures.

General and Administrative Expenses

Amount% Increase(Decrease)

% Increase(Decrease)excluding


% Increase(Decrease)excluding


and 53rd week2011 2010 2009 2011 2010 2011 2010 2011

China $ 275 $ 216 $ 188 27 15 22 15 22YRI 422 378 362 12 4 8 1 7U.S. 450 492 482 (8) 2 N/A N/A (9)Unallocated 225 191 189 18 1 N/A N/A 17

Worldwide $ 1,372 $ 1,277 $ 1,221 7 5 5 3 5

The increase in China G&A expenses for 2011, excluding the impact of foreign currency translation, was driven by increasedcompensation costs due to wage inflation and higher headcount.

The increase in China G&A expenses for 2010, excluding the impact of foreign currency translation, was driven by increasedcompensation costs resulting from wage inflation and higher headcount and the impact of the consolidation of a former unconsolidatedaffiliate during 2009 (See Note 4 for further discussion).



35



The increase in YRI G&A expenses for 2011, excluding the impact of foreign currency translation and 53rd week, was driven by increasedinvestment in strategic growth markets, including the acquisition of our Russia business in 2010, partially offset by G&A savings fromrefranchising all of our remaining company restaurants in Mexico.

The increase in YRI G&A expenses for 2010, excluding the impact of foreign currency translation, was driven by increased investmentin strategic growth markets, including costs related to the Russia acquisition (See Note 4 for further discussion), partially offset by G&Asavings from refranchising all of our remaining company restaurants in Taiwan.

The decrease in U.S. G&A expenses for 2011, excluding the impact of 53rd week, was driven by lapping of higher litigation and incentivecompensation costs in 2010 and G&A savings from the actions taken as part of our U.S. business transformation measures.

The increase in U.S. G&A expenses for 2010 was driven by increased litigation and incentive compensation costs, partially offset byG&A savings from the actions taken as part of our U.S. business transformation measures and lower project spending.

The increase in Unallocated G&A expenses for 2011, excluding the impact of 53rd week, was driven primarily by actions taken as part ofour U.S. business transformation measures and costs related to the LJS and A&W divestitures.

The increase in Unallocated G&A expenses for 2010 was driven by increased litigation and incentive compensation costs, partially offsetby G&A savings from the actions taken as part of our U.S. business transformation measures.

Worldwide Franchise and License Expenses

Franchise and license expenses increased 32% in 2011. The increase was driven by higher franchise-related rent expense anddepreciation (primarily at YRI), Pizza Hut U.S. franchise development incentives, higher provision for U.S. past-due receivables(primarily at KFC) and 2011 bi-annual YRI franchise convention costs.

Franchise and license expenses decreased 7% in 2010. The decrease was driven by lower provision for U.S. past-due receivables(primarily at KFC and Pizza Hut) and lapping 2009 international franchise convention costs.

Worldwide Other (Income) Expense 2011 2010 2009Equity income from investments in unconsolidated affiliates $ (47) $ (42) $ (36)Gain upon consolidation of a former unconsolidated affiliate in China(a) — — (68)Foreign exchange net (gain) loss and other (6) (1) —

Other (income) expense $ (53) $ (43) $ (104)

(a) See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in China.

Worldwide Closure and Impairment Expenses and Refranchising (Gain) Loss

See the Store Portfolio Strategy section for more detail of our refranchising activity and Note 4 for a summary of the Closure andimpairment expenses and Refranchising (gain) loss by reportable operating segment.

36



Operating Profit

Amount % B/(W)

% B/(W)excluding foreign

currencytranslation

2011 2010 2009 2011 2010 2011 2010

China $ 908 $ 755 $ 596 20 27 15 26

YRI 673 589 497 14 19 9 11

United States 589 668 647 (12) 3 N/A N/A

Unallocated Franchise and license fees and income — — (32) NM NM N/A N/A

Unallocated Occupancy and Other 14 9 — 58 NM N/A N/A

Unallocated and corporate expenses (223) (194) (189) (15) (3) N/A N/A

Unallocated Closures and impairment expense (80) — (26) NM NM N/A N/A

Unallocated Other income (expense) 6 5 71 NM NM N/A N/A

Unallocated Refranchising gain (loss) (72) (63) 26 NM NM N/A N/A

Operating Profit $1,815 $ 1,769 $ 1,590 3 11 (2) 9

China Operating margin 16.3% 18.3% 17.5% (2.0) ppts. 0.8 ppts. (2.0) 0.8

YRI Operating margin 20.6% 19.1% 16.6% 1.5 ppts. 2.5 ppts. 1.4 2.0

United States Operating margin 15.5% 16.2% 14.5% (0.7) ppts. 1.7 ppts. N/A N/A

China Division Operating Profit increased 20% in 2011, including a 5% favorable impact from foreign currency translation. Excludingforeign currency, the increase was driven by the impact of same-store sales growth and net unit development, partially offset by higherrestaurant operating costs, higher G&A expenses and lapping the effect of our brands' participation in the World Expo in 2010.

China Division Operating Profit increased 27% in 2010, including a 1% favorable impact from foreign currency translation. The increasewas driven by the impact of same-store sales growth and new unit development, partially offset by higher G&A costs. Operating Profitin 2010 benefited $16 million from our brands' participation in the World Expo.

YRI Division Operating Profit increased 14% in 2011, including a favorable impact from foreign currency translation of 5%. Excludingthe favorable impact from foreign currency translation, the increase of 9% was driven by the impact of same-store sales growth, new unitdevelopment and refranchising, partially offset by higher restaurant operating costs and G&A expenses.

YRI Division Operating Profit increased 19% in 2010, including an 8% favorable impact from foreign currency translation. Excludingthe favorable impact from foreign currency translation, the increase was driven by the impact of new unit development and refranchising.

U.S. Operating Profit decreased 12% in 2011. The decrease was driven by higher restaurant operating costs, higher franchise and licenseexpenses and same-store sales declines, partially offset by lower G&A expenses.

U.S. Operating Profit increased 3% in 2010. The increase was driven by lower Closure and impairment costs, partially offset by increasedlitigation costs.

Unallocated and corporate expenses increased 15% in 2011. The increase was driven by actions taken as part of our U.S. Businesstransformation measures, as well as costs incurred related to the LJS and A&W divestitures.

Unallocated and corporate expenses increased 3% in 2010 due to higher litigation and incentive compensation costs, partially offset byG&A savings from the actions taken as part of our U.S. business transformation measures.

Unallocated Closures and impairment expense in 2011 includes $80 million of losses related to the LJS and A&W divestitures.

Unallocated Other income (expense) in 2009 includes a $68 million gain upon acquisition of additional ownership, and consolidation of,the entity that operates KFCs in Shanghai, China. See Note 4 for further discussion.

Unallocated Refranchising gain (loss) in 2011, 2010 and 2009 is discussed in Note 4.



37



Interest Expense, Net

2011 2010 2009Interest expense $ 184 $ 195 $ 212Interest income (28) (20) (18)

Interest expense, net $ 156 $ 175 $ 194

The decrease in Interest expense, net for 2011 was primarily driven by lower interest rates on outstanding borrowings in 2011 versus2010. Additionally, interest income increased due to higher cash balances.

The decrease in Interest expense, net for 2010 was driven by both a decrease in average net borrowings and a decline in interest rates onthe variable portion of our debt.

Income Taxes

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to our effective tax rate is set forth below:

2011 2010 2009U.S. federal statutory rate $ 580 35.0% $ 558 35.0% $ 489 35.0%State income tax, net of federal tax benefit 2 0.1 12 0.7 14 1.0Statutory rate differential attributable to foreign operations (218) (13.1) (235) (14.7) (159) (11.4)Adjustments to reserves and prior years 24 1.4 55 3.5 (9) (0.6)Net benefit from LJS and A&W divestitures (72) (4.3) — — — —Change in valuation allowances 22 1.3 22 1.4 (9) (0.7)Other, net (14) (0.9) 4 0.2 (13) (0.9)

Income Tax Provision $ 324 19.5% $ 416 26.1% $ 313 22.4%

Statutory rate differential attributable to foreign operations. This item includes local taxes, withholding taxes, and shareholder-leveltaxes, net of foreign tax credits. The favorable impact is primarily attributable to a majority of our income being earned outside of theU.S. where tax rates are generally lower than the U.S. rate.

In 2011 and 2010, the benefit was positively impacted by the recognition of excess foreign tax credits generated by our intent to repatriatecurrent year foreign earnings.

In 2009, the benefit was negatively impacted by withholding taxes associated with the distribution of intercompany dividends that wereonly partially offset by related foreign tax credits generated during the year.

Adjustments to reserves and prior years. This item includes: (1) the effects of reconciling income tax amounts recorded in ourConsolidated Statements of Income to amounts reflected on our tax returns, including any adjustments to the Consolidated BalanceSheets; and (2) changes in tax reserves, including interest thereon, established for potential exposure we may incur if a taxing authoritytakes a position on a matter contrary to our position. We evaluate these amounts on a quarterly basis to insure that they have beenappropriately adjusted for audit settlements and other events we believe may impact the outcome. The impact of certain effects orchanges may offset items reflected in the ‘Statutory rate differential attributable to foreign operations’ line.

In 2009, this item included out-of-year adjustments which lowered our effective tax rate by 1.6 percentage points.

Change in valuation allowance. This item relates to changes for deferred tax assets generated or utilized during the current year andchanges in our judgment regarding the likelihood of using deferred tax assets that existed at the beginning of the year. The impact ofcertain changes may offset items reflected in the ‘Statutory rate differential attributable to foreign operations’ line.



In 2011, $22 million of net tax expense was driven by $15 million for valuation allowances recorded against deferred tax assets generatedduring the current year and $7 million of tax expense resulting from a change in judgment regarding the future use of certain foreigndeferred tax assets that existed at the beginning of the year. These amounts exclude $45 million in valuation

38



allowance additions related to capital losses recognized as a result of the LJS and A&W divestitures, which are presented within NetBenefit from LJS and A&W divestitures.

In 2010, the $22 million of net tax expense was driven by $25 million for valuation allowances recorded against deferred tax assetsgenerated during the current year. This expense was partially offset by a $3 million tax benefit resulting from a change in judgmentregarding the future use of U.S. state deferred tax assets that existed at the beginning of the year.

In 2009, the $9 million net tax benefit was driven by $25 million of benefit resulting from a change in judgment regarding the futureuse of foreign deferred tax assets that existed at the beginning of the year. This benefit was partially offset by $16 million for valuationallowances recorded against deferred tax assets generated during the year.

Net benefit from LJS and A&W divestitures. This item includes a one-time $117 million tax benefit, including approximately $8 millionstate benefit, recognized on the LJS and A&W divestitures in 2011, partially offset by $45 million of valuation allowance, includingapproximately $4 million state expense, related to capital loss carryforwards recognized as a result of the divestitures. In addition, werecorded $32 million of tax benefits on $86 million of pre-tax losses and other costs which resulted in $104 million of total net tax benefitsrelated to the divestitures.

Other. This item primarily includes the impact of permanent differences related to current year earnings and U.S. tax credits.

In 2009, this item was positively impacted by a one-time pre-tax gain of approximately $68 million, with no related income tax expense,recognized on our acquisition of additional interest in, and consolidation of, the entity that operates KFC in Shanghai, China. This waspartially offset by a pre-tax U.S. goodwill impairment charge of approximately $26 million, with no related income tax benefit.

Consolidated Cash Flows

Net cash provided by operating activities was $2,170 million compared to $1,968 million in 2010. The increase was primarily drivenby higher operating profit before Special Items.

In 2010, net cash provided by operating activities was $1,968 million compared to $1,404 million in 2009. The increase was primarilydriven by higher operating profit before Special Items and decreased pension contributions.

Net cash used in investing activities was $1,006 million versus $579 million in 2010. The increase was driven by an increase inRestricted cash and higher capital spending.

In 2010, net cash used in investing activities was $579 million versus $727 million in 2009. The decrease was driven by lapping the2009 acquisition of a non-controlling interest in Little Sheep, and increased proceeds from refranchising, partially offset by the 2010acquisition of our partner’s interest in Rostik’s-KFC. See Note 4 for further discussion.

Net cash used in financing activities was $1,413 million versus $337 million in 2010. The increase was driven by lower net borrowingsand an increase in share repurchases.

In 2010, net cash used in financing activities was $337 million versus $542 million in 2009. The decrease was driven by higher netborrowings, partially offset by an increase in share repurchases.

Consolidated Financial ConditionThe increase in Restricted cash was due to $300 million in funds placed in escrow which were restricted to the acquisition of an additional66% interest in Little Sheep. See Notes 4 and 21.

The decrease in Intangible assets was primarily due to the LJS and A&W divestitures. See Note 4.

The decrease in Short-term borrowings was primarily due to the maturity of $650 million of Senior Unsecured Notes in April 2011, offsetby $263 million of Senior Unsecured Notes due in June 2012 being classified as short term as of December 31, 2011.

Liquidity and Capital Resources



Operating in the QSR industry allows us to generate substantial cash flows from the operations of our company stores and from ourextensive franchise operations which require a limited YUM investment. Net cash provided by operating activities has exceeded $1billion in each of the last ten fiscal years, including over $2 billion in 2011. We expect these levels of net cash provided by

39



operating activities to continue in the foreseeable future. However, unforeseen downturns in our business could adversely impact ourcash flows from operations from the levels historically realized.

In the event our cash flows are negatively impacted by business downturns, we believe we have the ability to temporarily reduceour discretionary spending without significant impact to our long-term business prospects. Our discretionary spending includes capitalspending for new restaurants, acquisitions of restaurants from franchisees, repurchases of shares of our Common Stock and dividends paidto our shareholders. Additionally, as of December 31, 2011 we had approximately $1.1 billion in unused capacity under our revolvingcredit facilities that expire in November 2012, primarily related to a domestic facility. We are in the process of renewing these facilities.

China and YRI represented more than 70% of the Company’s operating profit in 2011 (excluding Corporate and unallocated incomeand expenses) and both generate a significant amount of positive cash flows that we have historically used to fund our internationaldevelopment. To the extent we have needed to repatriate international cash to fund our U.S. discretionary cash spending, including sharerepurchases, dividends and debt repayments, we have historically been able to do so in a tax-efficient manner. If we experience anunforeseen decrease in our cash flows from our U.S. business or are unable to refinance future U.S. debt maturities we may be requiredto repatriate future international earnings at tax rates higher than we have historically experienced.

We currently have investment-grade ratings from Standard & Poor’s Rating Services (BBB-) and Moody’s Investors Service(Baa3). While we do not anticipate a downgrade in our credit rating, a downgrade would increase the Company’s current borrowing costsand could impact the Company’s ability to access the credit markets cost-effectively if necessary. Based on the amount and compositionof our debt at December 31, 2011, which included no borrowings outstanding under our credit facilities, our interest expense would notmaterially increase on a full-year basis should we receive a one-level downgrade in our ratings.

Discretionary Spending

During 2011, we invested $940 million in capital spending, including approximately $405 million in China, $256 million in YRI and$279 million in the U.S. For 2012, we estimate capital spending will be approximately $1 billion.

During the year ended December 31, 2011 we repurchased shares for $752 million, which includes the effect of $19 million in sharerepurchases with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010 fiscal year. In January2011, our Board of Directors authorized share repurchases through July 2012 of up to $750 million (excluding applicable transactionfees) of our outstanding Common Stock, and on November 18, 2011, our Board of Directors authorized additional share repurchasesthrough May 2013 of up to $750 million (excluding applicable transaction fees) of our outstanding Common Stock. At December 31,2011, we had remaining capacity to repurchase up to approximately $938 million of outstanding Common Stock (excluding applicabletransaction fees) under these authorizations. Shares are repurchased opportunistically as part of our regular capital structure decisions.

During the year ended December 31, 2011, we paid cash dividends of $481 million. Additionally, on November 18, 2011 our Board ofDirectors approved cash dividends of $0.285 per share of Common Stock to be distributed on February 3, 2012 to shareholders of recordat the close of business on January 13, 2012. The Company is targeting an ongoing annual dividend payout ratio of 35% to 40% of netincome.

In connection with the proposal to acquire an additional 66% of Little Sheep, we placed $300 million in escrow to demonstrate availabilityof funds to acquire additional shares in this business. The funds placed in escrow were restricted to the pending acquisition of LittleSheep and are separately presented in our Consolidated Balance Sheet as of December 31, 2011 and in our Consolidated Statement ofCash Flows for the year ended December 31, 2011. In February 2012, the funds were released from escrow upon our acquisition of LittleSheep. See Notes 4 and 21 for details.

Borrowing Capacity

Our primary bank credit agreement comprises a $1.15 billion syndicated senior unsecured revolving credit facility (the “Credit Facility”)which matures in November 2012 and includes 24 participating banks with commitments ranging from $20 million to $93 million. Webelieve the syndication reduces our dependency on any one bank.

Under the terms of the Credit Facility, we may borrow up to the maximum borrowing limit, less outstanding letters of credit or banker’sacceptances, where applicable. At December 31, 2011, our unused Credit Facility totaled $727 million net of outstanding letters of creditof $423 million. There were no borrowings outstanding under the Credit Facility at December 31, 2011. The interest rate for borrowingsunder the Credit Facility ranges from 0.25% to 1.25% over the London Interbank Offered Rate



40



(“LIBOR”) or is determined by an Alternate Base Rate, which is the greater of the Prime Rate or the Federal Funds Rate plus0.50%. The exact spread over LIBOR or the Alternate Base Rate, as applicable, depends on our performance under specified financialcriteria. Interest on any outstanding borrowings under the Credit Facility is payable at least quarterly.

We also have a $350 million, syndicated international revolving credit facility (the “ICF”) which matures in November 2012 and includessix banks with commitments ranging from $35 million to $90 million. We believe the syndication reduces our dependency on any onebank. There was available credit of $350 million and no borrowings outstanding under the ICF at the end of 2011. The interest ratefor borrowings under the ICF ranges from 0.31% to 1.50% over LIBOR or is determined by a Canadian Alternate Base Rate, whichis the greater of the Citibank, N.A., Canadian Branch’s publicly announced reference rate or the “Canadian Dollar Offered Rate” plus0.50%. The exact spread over LIBOR or the Canadian Alternate Base Rate, as applicable, depends upon YUM’s performance underspecified financial criteria. Interest on any outstanding borrowings under the ICF is payable at least quarterly.

The Credit Facility and the ICF are unconditionally guaranteed by our principal domestic subsidiaries. Additionally, the ICF isunconditionally guaranteed by YUM. These agreements contain financial covenants relating to maintenance of leverage and fixed chargecoverage ratios and also contain affirmative and negative covenants including, among other things, limitations on certain additionalindebtedness and liens, and certain other transactions specified in the agreement. Given the Company’s strong balance sheet and cashflows we were able to comply with all debt covenant requirements at December 31, 2011 with a considerable amount of cushion.

We are in the process of renewing these facilities.

Our remaining long-term debt primarily comprises Senior Unsecured Notes with varying maturity dates from 2012 through 2037 andinterest rates ranging from 2.38% to 7.70%. The Senior Unsecured Notes represent senior, unsecured obligations and rank equally in rightof payment with all of our existing and future unsecured unsubordinated indebtedness. Amounts outstanding under Senior UnsecuredNotes were $3.0 billion at December 31, 2011 including $263 million in Senior Unsecured Notes due in July 2012.

Both the Credit Facility and the ICF contain cross-default provisions whereby our failure to make any payment on any of our indebtednessin a principal amount in excess of $100 million, or the acceleration of the maturity of any such indebtedness, will constitute a defaultunder such agreement. Our Senior Unsecured Notes provide that the acceleration of the maturity of any of our indebtedness in a principalamount in excess of $50 million will constitute a default under the Senior Unsecured Notes if such acceleration is not annulled, or suchindebtedness is not discharged, within 30 days after notice.

Contractual Obligations

In addition to any discretionary spending we may choose to make, our significant contractual obligations and payments as ofDecember 31, 2011 included:

Total Less than 1 Year 1-3 Years 3-5 Years More than 5 YearsLong-term debt obligations(a) $ 4,774 $ 414 $ 339 $ 814 $ 3,207Capital leases(b) 437 65 53 52 267Operating leases(b) 5,337 612 1,116 956 2,653Purchase obligations(c) 797 695 77 16 9Other(d) 72 37 16 7 12

Total contractual obligations $ 11,417 $ 1,823 $ 1,601 $ 1,845 $ 6,148

(a) Debt amounts include principal maturities and expected interest payments. Rates utilized to determine interest payments forvariable rate debt are based on the LIBOR forward yield curve. Excludes a fair value adjustment of $26 million included in debtrelated to interest rate swaps that hedge the fair value of a portion of our debt. See Note 10.

(b) These obligations, which are shown on a nominal basis, relate to nearly 6,200 restaurants. See Note 11.

41



(c) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us andthat specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variableprice provisions; and the approximate timing of the transaction. We have excluded agreements that are cancelable withoutpenalty. Purchase obligations relate primarily to information technology, marketing, commodity agreements, purchases ofproperty, plant and equipment as well as consulting, maintenance and other agreements.

(d) Other consists of 2012 pension plan funding obligations and projected payments for deferred compensation.

We have not included in the contractual obligations table approximately $327 million of long-term liabilities for unrecognized tax benefitsrelating to various tax positions we have taken. These liabilities may increase or decrease over time as a result of tax examinations,and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxingauthorities. These liabilities also include potential payments that would be refunded in a future year and for which we anticipate that overtime there will be no net cash outflow.

We sponsor noncontributory defined benefit pension plans covering certain salaried and hourly employees, the most significant of whichare in the U.S. and UK. The most significant of these plans, the YUM Retirement Plan (the “Plan”), is funded while benefits from theother U.S. plans are paid by the Company as incurred. Our funding policy for the Plan is to contribute annually amounts that will at leastequal the minimum amounts required to comply with the Pension Protection Act of 2006. However, additional voluntary contributionsare made from time to time to improve the Plan’s funded status. At December 31, 2011 the Plan was in a net underfunded position of$248 million. The UK pension plans are in a net underfunded position of $4 million at our 2011 measurement date.

Based on the current funding status of the Plan and our UK pension plans, we currently estimate that we will be required to contributeapproximately $30 million to the Plan in 2012. No required contributions to the UK pension plans are expected in 2012. Investmentperformance and corporate bond rates have a significant effect on our net funding position as they drive our asset balances and discountrate assumption. Future changes in investment performance and corporate bond rates could impact our funded status and the timing andamounts of required contributions in 2012 and beyond.

Our post-retirement plan in the U.S. is not required to be funded in advance, but is pay as you go. We made post-retirement benefitpayments of $5 million in 2011 and no future funding amounts are included in the contractual obligations table. See Note 14 for furtherdetails about our pension and post-retirement plans.

We have excluded from the contractual obligations table payments we may make for exposures for which we are self-insured, includingworkers’ compensation, employment practices liability, general liability, automobile liability, product liability and property losses(collectively “property and casualty losses”) and employee healthcare and long-term disability claims. The majority of our recordedliability for self-insured employee healthcare, long-term disability and property and casualty losses represents estimated reserves forincurred claims that have yet to be filed or settled.

Off-Balance Sheet Arrangements

We have agreed to provide financial support, if required, to an entity that operates a franchisee lending program used primarily to assistfranchisees in the development of new restaurants and, to a lesser extent, in connection with the Company’s historical refranchisingprograms. As part of this agreement, we have provided a partial guarantee of approximately $14 million and two letters of credit totalingapproximately $23 million in support of the franchisee loan program at December 31, 2011. One such letter of credit could be used ifwe fail to meet our obligations under our guarantee. The other letter of credit could be used, in certain circumstances, to satisfy ourparticipation in the funding of the franchisee loan program. The total loans outstanding under the loan pool were $63 million with anadditional $17 million available for lending at December 31, 2011.

Our unconsolidated affiliates had approximately $75 million and $70 million of debt outstanding as of December 31, 2011 andDecember 25, 2010, respectively.

New Accounting Pronouncements Not Yet Adopted

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-04, Amendmentsto Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial ReportingStandards (Topic 820)-Fair Value Measurement (ASU 2011-04), to provide a consistent definition of fair value and ensure that the fairvalue measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU



2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair valuemeasurements. ASU 2011-04 is effective for the Company in its first quarter of fiscal 2012 and will be applied

42



prospectively. The Company is currently evaluating the impact of adopting ASU 2011-04, but currently believes there will be nosignificant impact on its consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220)-Presentation ofComprehensive Income (ASU 2011-05), to require an entity to present the total of comprehensive income, the components of net income,and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separatebut consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part ofthe statement of equity. ASU 2011-05 is effective for the Company in its first quarter of fiscal 2012 and will be applied retrospectively.The Company currently believes there will be no significant impact on its consolidated financial statements as a result of adopting thisstandard.

Critical Accounting Policies and Estimates

Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complexjudgments. These judgments involve estimations of the effect of matters that are inherently uncertain and may significantly impact ourquarterly or annual results of operations or financial condition. Changes in the estimates and judgments could significantly affect ourresults of operations, financial condition and cash flows in future years. A description of what we consider to be our most significantcritical accounting policies follows.

Impairment or Disposal of Long-Lived Assets

We review long-lived assets of restaurants (primarily PP&E and allocated intangible assets subject to amortization) that are currentlyoperating semi-annually for impairment, or whenever events or changes in circumstances indicate that the carrying amount of arestaurant may not be recoverable. We evaluate recoverability based on the restaurant’s forecasted undiscounted cash flows, whichincorporate our best estimate of sales growth and margin improvement based upon our plans for the unit and actual results at comparablerestaurants. For restaurant assets that are deemed to not be recoverable, we write down the impaired restaurant to its estimated fairvalue. Key assumptions in the determination of fair value are the future after-tax cash flows of the restaurant, which are reduced byfuture royalties a franchisee would pay, and discount rate. The after-tax cash flows incorporate reasonable sales growth and marginimprovement assumptions that would be used by a franchisee in the determination of a purchase price for the restaurant. Estimates offuture cash flows are highly subjective judgments and can be significantly impacted by changes in the business or economic conditions.

We perform an impairment evaluation at a restaurant group level if it is more likely than not that we will refranchise restaurants asa group. Expected net sales proceeds are generally based on actual bids from the buyer, if available, or anticipated bids given thediscounted projected after-tax cash flows, reduced by future royalties a franchisee would pay, for the group of restaurants. The after-taxcash flows used in determining the anticipated bids incorporate reasonable assumptions we believe a franchisee would make such as salesgrowth and margin improvement as well as expectations as to the useful lives of the restaurant assets. Historically, these anticipated bidshave been reasonably accurate estimations of the proceeds ultimately received.

The discount rate used in the fair value calculations is our estimate of the required rate of return that a franchisee would expect to receivewhen purchasing a similar restaurant or groups of restaurants and the related long-lived assets. The discount rate incorporates rates ofreturns for historical refranchising market transactions and is commensurate with the risks and uncertainty inherent in the forecasted cashflows.

We have certain definite-lived intangible assets that are not attributable to a specific restaurant, such as trademark/brand intangible assetsand franchise contract rights, which are amortized over their expected useful lives. We base the expected useful lives of our trademark/brand intangible assets on a number of factors including the competitive environment, our future development plans for the applicableConcept and the level of franchisee commitment to the Concept. We generally base the expected useful lives of our franchise contractrights on their respective contractual terms including renewals when appropriate.

These definite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carryingamount of the intangible asset may not be recoverable. An intangible asset that is deemed impaired is written down to its estimated fairvalue, which is based on discounted after-tax cash flows. For purposes of our impairment analysis, we update the cash flows that wereinitially used to value the definite-lived intangible asset to reflect our current estimates and assumptions over the asset’s future remaininglife.

See Note 2 for a further discussion of our policy regarding the impairment or disposal of property, plant and equipment.



43



Impairment of Goodwill

We evaluate goodwill for impairment on an annual basis or more often if an event occurs or circumstances change that indicatesimpairment might exist. Goodwill is evaluated for impairment through the comparison of fair value of our reporting units to their carryingvalues. Our reporting units are our operating segments in the U.S., our YRI business units (typically individual countries) and our ChinaDivision brands. Fair value is the price a willing buyer would pay for the reporting unit, and is generally estimated using discountedexpected future after-tax cash flows from company operations and franchise royalties.

Future cash flow estimates and the discount rate are the key assumptions when estimating the fair value of a reporting unit. Future cashflows are based on growth expectations relative to recent historical performance and incorporate sales growth and margin improvementassumptions that we believe a buyer would assume when determining a purchase price for the reporting unit. The sales growth andmargin improvement assumptions that factor into the discounted cash flows are highly correlated as cash flow growth can be achievedthrough various interrelated strategies such as product pricing and restaurant productivity initiatives. The discount rate is our estimate ofthe required rate of return that a third-party buyer would expect to receive when purchasing a business from us that constitutes a reportingunit. We believe the discount rate is commensurate with the risks and uncertainty inherent in the forecasted cash flows.

The fair values of each of our reporting units were substantially in excess of their respective carrying values as of the 2011 goodwillimpairment test that was performed at the beginning of the fourth quarter.

When we refranchise restaurants, we include goodwill in the carrying amount of the restaurants disposed of based on the relative fairvalues of the portion of the reporting unit disposed of in the refranchising versus the portion of the reporting unit that will be retained. Thefair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of thefuture cash flows expected to be generated by the restaurant and retained by the franchisee, which include a deduction for the anticipated,future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with the refranchisingtransaction. Appropriate adjustments are made to the fair value amount being disposed if such franchise agreement is determined to not beat prevailing market rates. When determining whether such franchise agreement is at prevailing market rates our primary considerationis consistency with the terms of our current franchise agreements both within the country that the restaurants are being refranchised inand around the world. The Company believes consistency in royalty rates as a percentage of sales is appropriate as the Company andfranchisee share in the impact of near-term fluctuations in sales results with the acknowledgment that over the long-term the royalty raterepresents an appropriate rate for both parties.

The discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee is reduced byfuture royalties the franchisee will pay the Company. The Company thus considers the fair value of future royalties to be received underthe franchise agreement as fair value retained in its determination of the goodwill to be written off when refranchising. Others mayconsider the fair value of these future royalties as fair value disposed of and thus would conclude that a larger percentage of a reportingunit’s fair value is disposed of in a refranchising transaction.

During 2011, the Company's reporting units with the most significant refranchising activity and recorded goodwill were our KFC U.S.operating segment and our Pizza Hut United Kingdom (“U.K.”) business unit. Within our KFC U.S. operating segment, 264 restaurantswere refranchised (representing 34% of beginning-of-year company units) and $8 million in goodwill was written off (representing 7%of beginning-of-year goodwill). Within our Pizza Hut U.K. business unit, 47 delivery restaurants were refranchised (representing 10% ofbeginning-of-year company units) and $4 million in goodwill was written off (representing 4% of beginning-of-year goodwill).

See Note 2 for a further discussion of our policies regarding goodwill.

Allowances for Franchise and License Receivables/Guarantees

Franchise and license receivable balances include royalties, initial fees and other ancillary receivables such as rent and fees for supportservices. Our reserve for franchisee or licensee receivable balances is based upon pre-defined aging criteria or upon the occurrence ofother events that indicate that we may not collect the balance due. This methodology results in an immaterial amount of unreserved pastdue receivable balances at December 31, 2011. As such, we believe our allowance for franchise and license receivables is adequate tocover potential exposure from uncollectible receivable balances at December 31, 2011.

We issue certain guarantees on behalf of franchisees primarily as a result of 1) assigning our interest in obligations under operating leases,primarily as a condition to the refranchising of certain Company restaurants, 2) facilitating franchisee development and 3) equipmentfinancing arrangements to facilitate the launch of new sales layers by franchisees. We recognize a liability for the fair value of suchguarantees upon inception of the guarantee and upon any subsequent modification, such as franchise lease renewals,



44



when we remain contingently liable. The fair value of a guarantee is the estimated amount at which the liability could be settled in acurrent transaction between willing unrelated parties.

The present value of the minimum payments of the assigned leases, discounted at our pre-tax cost of debt, is approximately $550million, at December 31, 2011. Current franchisees are the primary lessees under the vast majority of these leases. Additionally, we haveguaranteed approximately $17 million of franchisee loans for various programs. We generally have cross-default provisions with thesefranchisees that would put them in default of their franchise agreement in the event of non-payment under assigned leases and certainof the loan programs. We believe these cross-default provisions significantly reduce the risk that we will be required to make paymentsunder these guarantees and, historically, we have not been required to make significant payments for guarantees. If payment on theseguarantees becomes probable and estimable, we record a liability for our exposure under these guarantees. At December 31, 2011 wehave recorded an immaterial liability for our exposure under these guarantees which we consider to be probable and estimable. If webegin to be required to perform under these guarantees to a greater extent, our results of operations could be negatively impacted.

See Note 2 for a further discussion of our policies regarding franchise and license operations.

See Note 19 for a further discussion of our guarantees.

Self-Insured Property and Casualty Losses

We record our best estimate of the remaining cost to settle incurred self-insured workers' compensation, employment practices liability,general liability, automobile liability, product liability and property losses (collectively "property and casualty losses"). The estimate isbased on the results of an independent actuarial study and considers historical claim frequency and severity as well as changes in factorssuch as our business environment, benefit levels, medical costs and the regulatory environment that could impact overall self-insurancecosts. Additionally, our reserve includes a risk margin to cover unforeseen events that may occur over the several years required to settleclaims, increasing our confidence level that the recorded reserve is adequate.

See Note 19 for a further discussion of our insurance programs.

Pension Plans

Certain of our employees are covered under defined benefit pension plans. The most significant of these plans are in the U.S. We haverecorded the under-funded status of $383 million for these U.S. plans as a pension liability in our Consolidated Balance Sheet as ofDecember 31, 2011. These U.S. plans had a projected benefit obligation (“PBO”) of $1,381 million and a fair value of plan assets of$998 million at December 31, 2011.

The PBO reflects the actuarial present value of all benefits earned to date by employees and incorporates assumptions as to futurecompensation levels. Due to the relatively long time frame over which benefits earned to date are expected to be paid, our PBOs arehighly sensitive to changes in discount rates. For our U.S. plans, we measured our PBO using a discount rate of 4.90% at December 31,2011. This discount rate was determined with the assistance of our independent actuary. The primary basis for our discount ratedetermination is a model that consists of a hypothetical portfolio of ten or more corporate debt instruments rated Aa or higher by Moody’swith cash flows that mirror our expected benefit payment cash flows under the plan. We excluded from the model those corporate debtinstruments flagged by Moody’s for a potential downgrade and bonds with yields that were two standard deviations or more above themean. In considering possible bond portfolios, the model allows the bond cash flows for a particular year to exceed the expected benefitcash flows for that year. Such excesses are assumed to be reinvested at appropriate one-year forward rates and used to meet the benefitpayment cash flows in a future year. The weighted-average yield of this hypothetical portfolio was used to arrive at an appropriatediscount rate. We also ensure that changes in the discount rate as compared to the prior year are consistent with the overall change inprevailing market rates and make adjustments as necessary. A 50 basis-point increase in this discount rate would have decreased our U.S.plans’ PBO by approximately $107 million at our measurement date. Conversely, a 50 basis-point decrease in this discount rate wouldhave increased our U.S. plans’ PBO by approximately $121 million at our measurement date.

The pension expense we will record in 2012 is also impacted by the discount rate we selected at our measurement date. We expectpension expense for our U.S. plans to increase approximately $36 million in 2012. The increase is primarily driven by an increasein amortization of net loss due to a decrease in the discount rate. A 50 basis-point change in our discount rate assumption at ourmeasurement date would impact our 2012 U.S. pension expense by approximately $17 million.

The assumption we make regarding our expected long-term rates of return on plan assets also impacts our pension expense. Ourestimated long-term rate of return on U.S. plan assets represents the weighted-average of historical returns for each asset category,



45



adjusted for an assessment of current market conditions. Our expected long-term rate of return on U.S. plan assets, for purposes ofdetermining 2012 pension expense, at December 31, 2011 was 7.25%. We believe this rate is appropriate given the composition of ourplan assets and historical market returns thereon. A one percentage-point change in our expected long-term rate of return on plan assetsassumption would impact our 2012 U.S. pension expense by approximately $10 million.

A decrease in discount rates over time along with actual asset returns below expected returns have largely contributed to an unrecognizedpre-tax actuarial net loss of $540 million included in Accumulated other comprehensive income (loss) for the U.S. plans at December 31,2011. For purposes of determining 2011 pension expense, our funded status was such that we recognized $31 million of net loss in netperiodic benefit cost. We will recognize approximately $63 million of such loss in 2012.

See Note 14 for further discussion of our pension plans.

Stock Options and Stock Appreciation Rights Expense

Compensation expense for stock options and stock appreciation rights (“SARs”) is estimated on the grant date using a Black-Scholesoption pricing model. Our assumptions for the risk-free interest rate, expected term, expected volatility and expected dividend yieldare documented in Note 15. Additionally, we estimate pre-vesting forfeitures for purposes of determining compensation expense to berecognized. Future expense amounts for any particular quarterly or annual period could be affected by changes in our assumptions orchanges in market conditions.

We have determined that it is appropriate to group our stock option and SAR awards into two homogeneous groups when estimatingexpected term and pre-vesting forfeitures. These groups consist of grants made primarily to restaurant-level employees under ourRestaurant General Manager Stock Option Plan (the “RGM Plan”) and grants made to executives under our other stock awardplans. Historically, approximately 10% - 15% of total options and SARs granted have been made under the RGM Plan.

Stock option and SAR grants under the RGM Plan typically cliff-vest after four years and grants made to executives under our other stockaward plans typically have a graded vesting schedule and vest 25% per year over four years. We use a single weighted-average expectedterm for our awards that have a graded vesting schedule. We re-evaluate our expected term assumptions using historical exercise andpost-vesting employment termination behavior on a regular basis. We have determined that five years and six years are appropriateexpected terms for awards to restaurant-level employees and to executives, respectively.

Upon each stock award grant we re-evaluate the expected volatility, including consideration of both historical volatility of our stock aswell as implied volatility associated with our traded options. We have estimated pre-vesting forfeitures based on historical data. Basedon such data, we believe that approximately 50% of all awards granted under the RGM Plan will be forfeited and approximately 25% ofall awards granted to above-store executives will be forfeited.

Income Taxes

At December 31, 2011, we had valuation allowances of $368 million to reduce our $1.3 billion of deferred tax assets to amounts thatwill more likely than not be realized. The net deferred tax assets primarily relate to temporary differences in currently profitable U.S.federal and state, and foreign jurisdictions as well as U.S. federal and state tax credit carryovers that may be carried forward for ten years.The estimation of future taxable income in these jurisdictions and our resulting ability to utilize deferred tax assets can significantlychange based on future events, including our determinations as to feasibility of certain tax planning strategies. Thus, recorded valuationallowances may be subject to material future changes.

As a matter of course, we are regularly audited by federal, state and foreign tax authorities. We recognize the benefit of positions takenor expected to be taken in our tax returns in our Income Tax Provision when it is more likely than not that the position would be sustainedupon examination by these tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater thanfifty percent likely of being realized upon settlement. At December 31, 2011 we had $348 million of unrecognized tax benefits, $197million of which, if recognized, would impact the effective tax rate. We evaluate unrecognized tax benefits, including interest thereon,on a quarterly basis to ensure that they have been appropriately adjusted for events, including audit settlements, which may impact ourultimate payment for such exposures.

Additionally, we have not provided deferred tax for investments in foreign subsidiaries where the carrying values for financial reportingexceed the tax basis, totaling approximately $1.7 billion at December 31, 2011, as we believe the excess is essentially permanentlyinvested. If our intentions regarding the duration of theses investments change, deferred tax may need to be provided on this excess thatcould materially impact the provision for income taxes.



See Note 17 for a further discussion of our income taxes.

46



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to financial market risks associated with interest rates, foreign currency exchange rates and commodityprices. In the normal course of business and in accordance with our policies, we manage these risks through a variety of strategies, whichmay include the use of financial and commodity derivative instruments to hedge our underlying exposures. Our policies prohibit the useof derivative instruments for trading purposes, and we have procedures in place to monitor and control their use.

Interest Rate Risk

We have a market risk exposure to changes in interest rates, principally in the U.S. We attempt to minimize this risk and lower our overallborrowing costs through the utilization of derivative financial instruments, primarily interest rate swaps. These swaps are entered intowith financial institutions and have reset dates and critical terms that match those of the underlying debt. Accordingly, any change in fairvalue associated with interest rate swaps is offset by the opposite impact on the related debt.

At December 31, 2011 and December 25, 2010 a hypothetical 100 basis-point increase in short-term interest rates would result, overthe following twelve-month period, in a reduction of approximately $5 million and $8 million, respectively, in income before incometaxes. The estimated reductions are based upon the current level of variable rate debt and assume no changes in the volume orcomposition of that debt and include no impact from interest income related to cash and cash equivalents. In addition, the fair valueof our derivative financial instruments at December 31, 2011 and December 25, 2010 would decrease approximately $16 million and$22 million, respectively. The fair value of our Senior Unsecured Notes at December 31, 2011 and December 25, 2010 would decreaseapproximately $228 million and $191 million, respectively. Fair value was determined based on the present value of expected future cashflows considering the risks involved and using discount rates appropriate for the duration.

Foreign Currency Exchange Rate Risk

Changes in foreign currency exchange rates impact the translation of our reported foreign currency denominated earnings, cash flowsand net investments in foreign operations and the fair value of our foreign currency denominated financial instruments. Historically,we have chosen not to hedge foreign currency risks related to our foreign currency denominated earnings and cash flows through theuse of financial instruments. We attempt to minimize the exposure related to our net investments in foreign operations by financingthose investments with local currency debt when practical. In addition, we attempt to minimize the exposure related to foreign currencydenominated financial instruments by purchasing goods and services from third parties in local currencies when practical. Consequently,foreign currency denominated financial instruments consist primarily of intercompany short-term receivables and payables. At times, weutilize forward contracts to reduce our exposure related to these intercompany short-term receivables and payables. The notional amountand maturity dates of these contracts match those of the underlying receivables or payables such that our foreign currency exchange riskrelated to these instruments is minimized.

The combined Operating Profits of China and YRI constitute more than 70% of our Operating Profit in 2011, excluding unallocatedincome (expenses). In addition, the Company’s foreign currency net asset exposure (defined as foreign currency assets less foreigncurrency liabilities) totaled approximately $3.0 billion as of December 31, 2011. Operating in international markets exposes the Companyto movements in foreign currency exchange rates. The Company’s primary exposures result from our operations in Asia-Pacific, Europeand the Americas. For the fiscal year ended December 31, 2011 Operating Profit would have decreased approximately $170 million ifall foreign currencies had uniformly weakened 10% relative to the U.S. dollar. The estimated reduction assumes no changes in salesvolumes or local currency sales or input prices.

Commodity Price Risk

We are subject to volatility in food costs as a result of market risk associated with commodity prices. Our ability to recover increasedcosts through higher pricing is, at times, limited by the competitive environment in which we operate. We manage our exposure to thisrisk primarily through pricing agreements with our vendors.

47



Item 8. Financial Statements and Supplementary Data.

INDEX TO FINANCIAL INFORMATION

Page Reference

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm 49

Consolidated Statements of Income for the fiscal years ended December 31, 2011,December 25, 2010 and December 26, 2009 50

Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2011,December 25, 2010 and December 26, 2009 51

Consolidated Balance Sheets as of December 31, 2011 and December 25, 2010 52

Consolidated Statements of Shareholders’ Equity (Deficit) and ComprehensiveIncome (Loss) for the fiscal years ended December 31, 2011, December 25, 2010and December 26, 2009 53

Notes to Consolidated Financial Statements 54-93

Management’s Responsibility for Financial Statements 94

Financial Statement Schedules

No schedules are required because either the required information is not present or not present in amounts sufficient to require submissionof the schedule, or because the information required is included in the above-listed financial statements or notes thereto.

48



Report of Independent Registered Public Accounting Firm

The Board of Directors and ShareholdersYUM! Brands, Inc.

We have audited the accompanying consolidated balance sheets of YUM! Brands, Inc. and Subsidiaries (YUM) as of December 31,2011 and December 25, 2010, and the related consolidated statements of income, cash flows, and shareholders' equity (deficit) andcomprehensive income (loss) for each of the fiscal years in the three-year period ended December 31, 2011. We also have auditedYUM's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control - IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission. YUM's management is responsiblefor these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment ofthe effectiveness of internal control over financial reporting, included in the accompanying Item 9A, “Management's Report on InternalControl over Financial Reporting”. Our responsibility is to express an opinion on these consolidated financial statements and an opinionon YUM's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits ofthe consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financialstatement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control overfinancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in thecircumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordancewith authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financialstatements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial positionof YUM as of December 31, 2011 and December 25, 2010, and the results of its operations and its cash flows for each of the fiscalyears in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also in ouropinion, YUM maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based oncriteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission.

/s/ KPMG LLPLouisville, KentuckyFebruary 20, 2012

49



Consolidated Statements of IncomeYUM! Brands, Inc. and SubsidiariesFiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009(in millions, except per share data)

2011 2010 2009RevenuesCompany sales $ 10,893 $ 9,783 $ 9,413Franchise and license fees and income 1,733 1,560 1,423Total revenues 12,626 11,343 10,836Costs and Expenses, NetCompany restaurants

Food and paper 3,633 3,091 3,003Payroll and employee benefits 2,418 2,172 2,154Occupancy and other operating expenses 3,089 2,857 2,777

Company restaurant expenses 9,140 8,120 7,934General and administrative expenses 1,372 1,277 1,221Franchise and license expenses 145 110 118Closures and impairment (income) expenses 135 47 103Refranchising (gain) loss 72 63 (26)Other (income) expense (53) (43) (104)Total costs and expenses, net 10,811 9,574 9,246

Operating Profit 1,815 1,769 1,590

Interest expense, net 156 175 194

Income Before Income Taxes 1,659 1,594 1,396

Income tax provision 324 416 313Net Income – including noncontrolling interest 1,335 1,178 1,083Net Income – noncontrolling interest 16 20 12Net Income – YUM! Brands, Inc. $ 1,319 $ 1,158 $ 1,071

Basic Earnings Per Common Share $ 2.81 $ 2.44 $ 2.28

Diluted Earnings Per Common Share $ 2.74 $ 2.38 $ 2.22

Dividends Declared Per Common Share $ 1.07 $ 0.92 $ 0.80

See accompanying Notes to Consolidated Financial Statements.

50



Consolidated Statements of Cash Flows

YUM! Brands, Inc. and Subsidiaries

Fiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009(in millions)

2011 2010 2009

Cash Flows – Operating Activities

Net Income – including noncontrolling interest $ 1,335 $ 1,178 $ 1,083

Depreciation and amortization 628 589 580

Closures and impairment (income) expenses 135 47 103

Refranchising (gain) loss 72 63 (26)

Contributions to defined benefit pension plans (63) (52) (280)

Gain upon consolidation of a former unconsolidated affiliate in China — — (68)

Deferred income taxes (137) (110) 72

Equity income from investments in unconsolidated affiliates (47) (42) (36)

Distributions of income received from unconsolidated affiliates 39 34 31

Excess tax benefit from share-based compensation (66) (69) (59)

Share-based compensation expense 59 47 56

Changes in accounts and notes receivable (39) (12) 3

Changes in inventories (75) (68) 27

Changes in prepaid expenses and other current assets (25) 61 (7)

Changes in accounts payable and other current liabilities 144 61 (62)

Changes in income taxes payable 109 104 (95)

Other, net 101 137 82

Net Cash Provided by Operating Activities 2,170 1,968 1,404

Cash Flows – Investing Activities

Capital spending (940) (796) (797)

Proceeds from refranchising of restaurants 246 265 194

Acquisitions and investments (81) (62) (139)

Sales of property, plant and equipment 30 33 34

Increase in restricted cash (300) — —

Other, net 39 (19) (19)

Net Cash Used in Investing Activities (1,006) (579) (727)

Cash Flows – Financing Activities

Proceeds from long-term debt 404 350 499

Repayments of long-term debt (666) (29) (528)

Revolving credit facilities, three months or less, net — (5) (295)

Short-term borrowings by original maturity

More than three months – proceeds — — —

More than three months – payments — — —

Three months or less, net — (3) (8)

Repurchase shares of Common Stock (752) (371) —

Excess tax benefit from share-based compensation 66 69 59

Employee stock option proceeds 59 102 113

Dividends paid on Common Stock (481) (412) (362)

Other, net (43) (38) (20)



Net Cash Used in Financing Activities (1,413) (337) (542)Effect of Exchange Rates on Cash and Cash Equivalents 21 21 (15)Net Increase (Decrease) in Cash and Cash Equivalents (228) 1,073 120Change in Cash and Cash Equivalents due to consolidation of an entity in China — — 17Cash and Cash Equivalents – Beginning of Year 1,426 353 216Cash and Cash Equivalents – End of Year $ 1,198 $ 1,426 $ 353


51



Consolidated Balance SheetsYUM! Brands, Inc. and SubsidiariesDecember 31, 2011 and December 25, 2010(in millions)

2011 2010ASSETSCurrent AssetsCash and cash equivalents $ 1,198 $ 1,426Accounts and notes receivable, net 286 256Inventories 273 189Prepaid expenses and other current assets 338 269Deferred income taxes 112 61Advertising cooperative assets, restricted 114 112

Total Current Assets 2,321 2,313

Property, plant and equipment, net 4,042 3,830Goodwill 681 659Intangible assets, net 299 475Investments in unconsolidated affiliates 167 154Restricted cash 300 —Other assets 475 519Deferred income taxes 549 366

Total Assets $ 8,834 $ 8,316

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent LiabilitiesAccounts payable and other current liabilities $ 1,874 $ 1,602Income taxes payable 142 61Short-term borrowings 320 673Advertising cooperative liabilities 114 112

Total Current Liabilities 2,450 2,448

Long-term debt 2,997 2,915Other liabilities and deferred credits 1,471 1,284

Total Liabilities 6,918 6,647

Shareholders’ EquityCommon Stock, no par value, 750 shares authorized; 460 shares and 469 shares issued in 2011 and2010, respectively 18 86Retained earnings 2,052 1,717Accumulated other comprehensive loss (247) (227)

Total Shareholders’ Equity – YUM! Brands, Inc. 1,823 1,576Noncontrolling interests 93 93

Total Shareholders’ Equity 1,916 1,669



Total Liabilities and Shareholders’ Equity $ 8,834 $ 8,316


52



Consolidated Statements of Shareholders’ Equity (Deficit) and Comprehensive Income (Loss)

YUM! Brands, Inc. and SubsidiariesFiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009(in millions)

Yum! Brands, Inc.

Issued Common Stock RetainedAccumulated

Other Comprehensive NoncontrollingShares Amount Earnings Income(Loss) Interests Total

Balance at December 27, 2008 459 $ 7 $ 303 $ (418) $ 14 $ (94)

Net Income 1,071 12 1,083

Foreign currency translation adjustment 176 176Pension and post-retirement benefit plans (net oftax impact of $9 million) 13 13Net unrealized gain on derivative instruments (netof tax impact of $3 million) 5 5

Comprehensive Income 1,277Purchase of subsidiary shares from noncontrollinginterest 70 70

Dividends declared (378) (7) (385)Employee stock option and SARs exercises(includes tax impact of $57 million) 10 168 168Compensation-related events (includes tax impactof $2 million) — 78 78

Balance at December 26, 2009 469 $ 253 $ 996 $ (224) $ 89 $ 1,114

Net Income 1,158 20 1,178

Foreign currency translation adjustment 8 4 12Pension and post-retirement benefit plans (net oftax impact of $7 million) (10) (10)Net unrealized loss on derivative instruments (netof tax impact of $1 million) (1) (1)

Comprehensive Income 1,179

Dividends declared (437) (20) (457)

Repurchase of shares of Common Stock (10) (390) (390)Employee stock option and SARs exercises(includes tax impact of $73 million) 9 168 168Compensation-related events (includes tax impactof $7 million) 1 55 55

Balance at December 25, 2010 469 $ 86 $ 1,717 $ (227) $ 93 $ 1,669

Net Income 1,319 16 1,335

Foreign currency translation adjustment 85 6 91Pension and post-retirement benefit plans (net oftax impact of $65 million) (106) (106)Net unrealized gain on derivative instruments (netof tax impact of less than $1 million) 1 1

Comprehensive Income 1,321

Dividends declared (501) (22) (523)

Repurchase of shares of Common Stock (14) (250) (483) (733)



Employee stock option and SARs exercises(includes tax impact of $71 million) 5 119 119Compensation-related events (includes tax impactof $5 million) — 63 63

Balance at December 31, 2011 460 $ 18 $ 2,052 $ (247) $ 93 $ 1,916


53



Notes to Consolidated Financial Statements(Tabular amounts in millions, except share data)

Note 1 – Description of Business

YUM! Brands, Inc. and Subsidiaries (collectively referred to as “YUM” or the “Company”) comprises the worldwide operations of KFC,Pizza Hut and Taco Bell (collectively the “Concepts”). YUM is the world’s largest quick service restaurant company based on the numberof system units, with approximately 37,000 units of which approximately 50% are located outside the U.S. in more than 120 countriesand territories. YUM was created as an independent, publicly-owned company on October 6, 1997 via a tax-free distribution by ourformer parent, PepsiCo, Inc., of our Common Stock to its shareholders. References to YUM throughout these Consolidated FinancialStatements are made using the first person notations of “we,” “us” or “our.”

Through our widely-recognized Concepts, we develop, operate, franchise and license a system of both traditional and non-traditionalquick service restaurants. Each Concept has proprietary menu items and emphasizes the preparation of food with high quality ingredientsas well as unique recipes and special seasonings to provide appealing, tasty and attractive food at competitive prices. Our traditionalrestaurants feature dine-in, carryout and, in some instances, drive-thru or delivery service. Non-traditional units, which are principallylicensed outlets, include express units and kiosks which have a more limited menu and operate in non-traditional locations like malls,airports, gasoline service stations, train stations, subways, convenience stores, stadiums, amusement parks and colleges, where a full-scaletraditional outlet would not be practical or efficient. We also operate multibrand units, where two or more of our Concepts are operatedin a single unit.

YUM consists of five operating segments: YUM Restaurants China ("China" or “China Division”), YUM Restaurants International(“YRI” or “International Division”), KFC U.S., Pizza Hut U.S., and Taco Bell U.S. The China Division includes mainland China,and the International Division includes the remainder of our international operations. For financial reporting purposes, managementconsiders the three U.S. operating segments to be similar and, therefore, has aggregated them into a single reportable operating segment(“U.S.”). In December 2011 we sold our Long John Silver's ("LJS") and A&W All American Food Restaurants ("A&W") brands to keyfranchise leaders and strategic investors in separate transactions. The results for these businesses through the sale date are included in theCompany's results for 2011, 2010 and 2009. As a result of changes to our management reporting structure, in the first quarter of 2012 wewill begin reporting information for our India business as a standalone reporting segment separated from YRI. While our consolidatedresults will not be impacted, we will restate our historical segment information during 2012 for consistent presentation.

Note 2 – Summary of Significant Accounting Policies

Our preparation of the accompanying Consolidated Financial Statements in conformity with Generally Accepted Accounting Principlesin the United States of America (“GAAP”) requires us to make estimates and assumptions that affect reported amounts of assets andliabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenuesand expenses during the reporting period. Actual results could differ from these estimates. The Company evaluated subsequent eventsthrough the date the Consolidated Financial Statements were issued and filed with the Securities and Exchange Commission.

Principles of Consolidation and Basis of Preparation. Intercompany accounts and transactions have been eliminated inconsolidation. We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of amajority voting interest. We also consider for consolidation an entity, in which we have certain interests, where the controlling financialinterest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity(“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that possesses the power to directthe activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right toreceive benefits from the VIE that are significant to it.

Our most significant variable interests are in entities that operate restaurants under our Concepts’ franchise and license arrangements. Wedo not generally have an equity interest in our franchisee or licensee businesses with the exception of certain entities in China asdiscussed below. Additionally, we do not typically provide significant financial support such as loans or guarantees to our franchiseesand licensees. However, we do have variable interests in certain franchisees through real estate lease arrangements with them to whichwe are a party. At the end of 2011, YUM has future lease payments due from franchisees, on a nominal basis, of approximately $320million. As our franchise and license arrangements provide our franchisee and licensee entities the power to direct the activities thatmost significantly impact their economic performance, we do not consider ourselves the primary beneficiary of any such entity that mightotherwise be considered a VIE.



54



See Note 19 for additional information on an entity that operates a franchise lending program that is a VIE in which we have a variableinterest but for which we are not the primary beneficiary and thus do not consolidate.

Certain investments in entities that operate KFCs in China as well as our investment in Little Sheep Group Limited ("Little Sheep"), aChinese casual dining concept headquartered in Inner Mongolia, China, are accounted for by the equity method. These entities are notVIEs and our lack of majority voting rights precludes us from controlling these affiliates. Thus, we do not consolidate these affiliates,instead accounting for them under the equity method. Our share of the net income or loss of those unconsolidated affiliates is includedin Other (income) expense. Subsequent to fiscal year 2011, we acquired an additional 66% interest in Little Sheep. As a result, we willbegin consolidating this business in 2012. In the second quarter of 2009 we began consolidating the entity that operates the KFCs inShanghai, China, which was previously accounted for using the equity method. The increase in cash related to the consolidation of thisentitiy's cash balance of $17 million is presented as a single line item on our 2009 Consolidated Statement of Cash Flows.

We report Net income attributable to the non-controlling interest in the entity that operates the KFCs in Beijing, China and since itsconsolidation, the Shanghai entity, separately on the face of our Consolidated Statements of Income. The portion of equity in theseentities not attributable to the Company is reported within equity, separately from the Company’s equity on the Consolidated BalanceSheets.

See Note 4 for a further description of the accounting upon acquisition of additional interest in the Shanghai entity.

We participate in various advertising cooperatives with our franchisees and licensees established to collect and administer fundscontributed for use in advertising and promotional programs designed to increase sales and enhance the reputation of the Company andits franchise owners. Contributions to the advertising cooperatives are required for both Company-operated and franchise restaurants andare generally based on a percent of restaurant sales. We maintain certain variable interests in these cooperatives. As the cooperativesare required to spend all funds collected on advertising and promotional programs, total equity at risk is not sufficient to permit thecooperatives to finance their activities without additional subordinated financial support. Therefore, these cooperatives are VIEs. Asa result of our voting rights, we consolidate certain of these cooperatives for which we are the primary beneficiary. The Advertisingcooperatives assets, consisting primarily of cash received from the Company and franchisees and accounts receivable from franchisees,can only be used to settle obligations of the respective cooperative. The Advertising cooperative liabilities represent the correspondingobligation arising from the receipt of the contributions to purchase advertising and promotional programs for which creditors do not haverecourse to the general credit of the primary beneficiary. Therefore, we report all assets and liabilities of these advertising cooperativesthat we consolidate as Advertising cooperative assets, restricted and Advertising cooperative liabilities in the Consolidated BalanceSheet. As the contributions to these cooperatives are designated and segregated for advertising, we act as an agent for the franchiseesand licensees with regard to these contributions. Thus, we do not reflect franchisee and licensee contributions to these cooperatives inour Consolidated Statements of Income or Consolidated Statements of Cash Flows.

Fiscal Year. Our fiscal year ends on the last Saturday in December and, as a result, a 53rd week is added every five or six years. Thefirst three quarters of each fiscal year consist of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17weeks in fiscal years with 53 weeks. Our subsidiaries operate on similar fiscal calendars except that China and certain other internationalsubsidiaries operate on a monthly calendar, and thus never have a 53rd week, with two months in the first quarter, three months in thesecond and third quarters and four months in the fourth quarter. All of our international businesses except China close one period or onemonth earlier to facilitate consolidated reporting.

Fiscal year 2011 included 53 weeks for our U.S. businesses and a portion of our YRI business. The 53rd week added $91 million to totalrevenues, $15 million to Restaurant profit and $25 million to Operating Profit in our 2011 Consolidated Statement of Income. The $25million benefit was offset throughout 2011 by investments, including franchise development incentives, as well as higher-than-normalspending, such as restaurant closures in the U.S. and YRI.

Foreign Currency. The functional currency determination for operations outside the U.S. is based upon a number of economic factors,including but not limited to cash flows and financing transactions. Income and expense accounts are translated into U.S. dollars at theaverage exchange rates prevailing during the period. Assets and liabilities are translated into U.S. dollars at exchange rates in effectat the balance sheet date. Resulting translation adjustments are recorded in Accumulated other comprehensive income (loss) in theConsolidated Balance Sheet and are subsequently recognized as income or expense only upon sale or upon complete or substantiallycomplete liquidation of the related investment in a foreign entity. Gains and losses arising from the impact of foreign currency exchangerate fluctuations on transactions in foreign currency are included in Other (income) expense in our Consolidated Statement of Income.

55



Reclassifications. We have reclassified certain items in the Consolidated Financial Statements for prior periods to be comparable withthe classification for the fiscal year ended December 31, 2011. These reclassifications had no effect on previously reported Net Income -YUM! Brands, Inc.

Franchise and License Operations. We execute franchise or license agreements for each unit operated by third parties which set outthe terms of our arrangement with the franchisee or licensee. Our franchise and license agreements typically require the franchisee orlicensee to pay an initial, non-refundable fee and continuing fees based upon a percentage of sales. Subject to our approval and theirpayment of a renewal fee, a franchisee may generally renew the franchise agreement upon its expiration.

The internal costs we incur to provide support services to our franchisees and licensees are charged to General and Administrative(“G&A”) expenses as incurred. Certain direct costs of our franchise and license operations are charged to franchise and licenseexpenses. These costs include provisions for estimated uncollectible fees, rent or depreciation expense associated with restaurants welease or sublease to franchisees, franchise and license marketing funding, amortization expense for franchise-related intangible assets andcertain other direct incremental franchise and license support costs.

Revenue Recognition. Revenues from Company-operated restaurants are recognized when payment is tendered at the time of sale. TheCompany presents sales net of sales-related taxes. Income from our franchisees and licensees includes initial fees, continuing fees,renewal fees and rental income from restaurants we lease or sublease to them. We recognize initial fees received from a franchisee orlicensee as revenue when we have performed substantially all initial services required by the franchise or license agreement, which isgenerally upon the opening of a store. We recognize continuing fees based upon a percentage of franchisee and licensee sales and rentalincome as earned. We recognize renewal fees when a renewal agreement with a franchisee or licensee becomes effective. We presentinitial fees collected upon the sale of a restaurant to a franchisee in Refranchising (gain) loss.

Direct Marketing Costs. We charge direct marketing costs to expense ratably in relation to revenues over the year in which incurredand, in the case of advertising production costs, in the year the advertisement is first shown. Deferred direct marketing costs, which areclassified as prepaid expenses, consist of media and related advertising production costs which will generally be used for the first time inthe next fiscal year and have historically not been significant. To the extent we participate in advertising cooperatives, we expense ourcontributions as incurred which are generally based on a percentage of sales. Our advertising expenses were $593 million, $557 millionand $548 million in 2011, 2010 and 2009, respectively. We report substantially all of our direct marketing costs in Occupancy and otheroperating expenses.

Research and Development Expenses. Research and development expenses, which we expense as incurred, are reported in G&Aexpenses. Research and development expenses were $34 million, $33 million and $31 million in 2011, 2010 and 2009, respectively.

Share-Based Employee Compensation. We recognize all share-based payments to employees, including grants of employee stockoptions and stock appreciation rights (“SARs”), in the Consolidated Financial Statements as compensation cost over the service periodbased on their fair value on the date of grant. This compensation cost is recognized over the service period on a straight-line basis for thefair value of awards that actually vest. We present this compensation cost consistent with the other compensation costs for the employeerecipient in either Payroll and employee benefits or G&A expenses.

Legal Costs. Settlement costs are accrued when they are deemed probable and estimable. Anticipated legal fees related to self-insured workers' compensation, employment practices liability, general liability, automobile liability, product liability and property losses(collectively, "property and casualty losses") are accrued when deemed probable and estimable. Legal fees not related to self-insuredproperty and casualty losses are recognized as incurred.

Impairment or Disposal of Property, Plant and Equipment. Property, plant and equipment (“PP&E”) is tested for impairmentwhenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The assets are notrecoverable if their carrying value is less than the undiscounted cash flows we expect to generate from such assets. If the assets are notdeemed to be recoverable, impairment is measured based on the excess of their carrying value over their fair value.

For purposes of impairment testing for our restaurants, we have concluded that an individual restaurant is the lowest level of independentcash flows unless our intent is to refranchise restaurants as a group. We review our long-lived assets of such individual restaurants(primarily PP&E and allocated intangible assets subject to amortization) semi-annually for impairment, or whenever events or changesin circumstances indicate that the carrying amount of a restaurant may not be recoverable. We use two consecutive years of operatinglosses as our primary indicator of potential impairment for our semi-annual impairment testing of these restaurant assets. We evaluatethe recoverability of these restaurant assets by comparing the estimated undiscounted future cash flows, which are based on our entity-specific assumptions, to the carrying value of such assets. For restaurant assets that are not deemed to be



56



recoverable, we write-down an impaired restaurant to its estimated fair value, which becomes its new cost basis. Fair value is an estimateof the price a franchisee would pay for the restaurant and its related assets and is determined by discounting the estimated future after-taxcash flows of the restaurant, which include a deduction for the royalty the franchisee would pay us. The after-tax cash flows incorporatereasonable assumptions we believe a franchisee would make such as sales growth and margin improvement. The discount rate used inthe fair value calculation is our estimate of the required rate of return that a franchisee would expect to receive when purchasing a similarrestaurant and the related long-lived assets. The discount rate incorporates rates of returns for historical refranchising market transactionsand is commensurate with the risks and uncertainty inherent in the forecasted cash flows.

In executing our refranchising initiatives, we most often offer groups of restaurants for sale. When we believe a restaurant or groupsof restaurants will be refranchised for a price less than their carrying value, but do not believe the restaurant(s) have met the criteria tobe classified as held for sale, we review the restaurants for impairment. We evaluate the recoverability of these restaurant assets at thedate it is considered more likely than not that they will be refranchised by comparing estimated sales proceeds plus holding period cashflows, if any, to the carrying value of the restaurant or group of restaurants. For restaurant assets that are not deemed to be recoverable,we recognize impairment for any excess of carrying value over the fair value of the restaurants, which is based on the expected net salesproceeds. To the extent ongoing agreements to be entered into with the franchisee simultaneous with the refranchising are expected tocontain terms, such as royalty rates, not at prevailing market rates, we consider the off-market terms in our impairment evaluation. Werecognize any such impairment charges in Refranchising (gain) loss. We classify restaurants as held for sale and suspend depreciationand amortization when (a) we make a decision to refranchise; (b) the restaurants can be immediately removed from operations; (c) wehave begun an active program to locate a buyer; (d) the restaurant is being actively marketed at a reasonable market price; (e) significantchanges to the plan of sale are not likely; and (f) the sale is probable within one year. Restaurants classified as held for sale are recordedat the lower of their carrying value or fair value less cost to sell. We recognize estimated losses on restaurants that are classified as heldfor sale in Refranchising (gain) loss.

Refranchising (gain) loss includes the gains or losses from the sales of our restaurants to new and existing franchisees, includingimpairment charges discussed above, and the related initial franchise fees. We recognize gains on restaurant refranchisings when the saletransaction closes, the franchisee has a minimum amount of the purchase price in at-risk equity, and we are satisfied that the franchiseecan meet its financial obligations. If the criteria for gain recognition are not met, we defer the gain to the extent we have a remainingfinancial exposure in connection with the sales transaction. Deferred gains are recognized when the gain recognition criteria are met oras our financial exposure is reduced. When we make a decision to retain a store, or group of stores, previously held for sale, we revaluethe store at the lower of its (a) net book value at our original sale decision date less normal depreciation and amortization that would havebeen recorded during the period held for sale or (b) its current fair value. This value becomes the store’s new cost basis. We record anyresulting difference between the store’s carrying amount and its new cost basis to Closure and impairment (income) expense.

When we decide to close a restaurant, it is reviewed for impairment and depreciable lives are adjusted based on the expected disposaldate. Other costs incurred when closing a restaurant such as costs of disposing of the assets as well as other facility-related expensesfrom previously closed stores are generally expensed as incurred. Additionally, at the date we cease using a property under an operatinglease, we record a liability for the net present value of any remaining lease obligations, net of estimated sublease income, if any. Anycosts recorded upon store closure as well as any subsequent adjustments to liabilities for remaining lease obligations as a result of leasetermination or changes in estimates of sublease income are recorded in Closures and impairment (income) expenses. To the extent wesell assets, primarily land, associated with a closed store, any gain or loss upon that sale is also recorded in Closures and impairment(income) expenses.

Considerable management judgment is necessary to estimate future cash flows, including cash flows from continuing use, terminal value,sublease income and refranchising proceeds. Accordingly, actual results could vary significantly from our estimates.

Impairment of Investments in Unconsolidated Affiliates. We record impairment charges related to an investment in an unconsolidatedaffiliate whenever events or circumstances indicate that a decrease in the fair value of an investment has occurred which is otherthan temporary. In addition, we evaluate our investments in unconsolidated affiliates for impairment when they have experienced twoconsecutive years of operating losses. We recorded no impairment associated with our investments in unconsolidated affiliates during2011, 2010 and 2009.

Guarantees. We recognize, at inception of a guarantee, a liability for the fair value of certain obligations undertaken. The majority ofour guarantees are issued as a result of assigning our interest in obligations under operating leases as a condition to the refranchising ofcertain Company restaurants. We recognize a liability for the fair value of such lease guarantees upon refranchising

57



and upon subsequent renewals of such leases when we remain contingently liable. The related expense and any subsequent changes in theguarantees are included in Refranchising (gain) loss. The related expense and subsequent changes in the guarantees for other franchisesupport guarantees not associated with a refranchising transaction are included in Franchise and license expense.

Income Taxes. We record deferred tax assets and liabilities for the future tax consequences attributable to temporary differences betweenthe financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and taxcredit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in theyears in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change intax rates is recognized in income in the period that includes the enactment date. Additionally, in determining the need for recording avaluation allowance against the carrying amount of deferred tax assets, we consider the amount of taxable income and periods over whichit must be earned, actual levels of past taxable income and known trends and events or transactions that are expected to affect future levelsof taxable income. Where we determine that it is more likely than not that all or a portion of an asset will not be realized, we record avaluation allowance.

We recognize the benefit of positions taken or expected to be taken in our tax returns in our Income tax provision when it is morelikely than not (i.e. a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. Arecognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized uponsettlement. Changes in judgment that result in subsequent recognition, derecognition or change in a measurement of a tax position takenin a prior annual period (including any related interest and penalties) are recognized as a discrete item in the interim period in which thechange occurs.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of its Income tax provision.


Fair Value Measurements. Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderlytransaction between market participants. For those assets and liabilities we record or disclose at fair value, we determine fair value basedupon the quoted market price, if available. If a quoted market price is not available for identical assets, we determine fair value basedupon the quoted market price of similar assets or the present value of expected future cash flows considering the risks involved, includingcounterparty performance risk if appropriate, and using discount rates appropriate for the duration. The fair values are assigned a levelwithin the fair value hierarchy, depending on the source of the inputs into the calculation.

Level 1 Inputs based upon quoted prices in active markets for identical assets.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset, either directly orindirectly.

Level 3 Inputs that are unobservable for the asset.

Cash and Cash Equivalents. Cash equivalents represent funds we have temporarily invested (with original maturities not exceedingthree months), including short-term, highly liquid debt securities.

Receivables. The Company’s receivables are primarily generated as a result of ongoing business relationships with our franchisees andlicensees as a result of franchise, license and lease agreements. Trade receivables consisting of royalties from franchisees and licenseesare generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts and notes receivableon our Consolidated Balance Sheets. Our provision for uncollectible franchise and licensee receivable balances is based upon pre-definedaging criteria or upon the occurrence of other events that indicate that we may not collect the balance due. Additionally, we monitor thefinancial condition of our franchisees and licensees and record provisions for estimated losses on receivables when we believe it probablethat our franchisees or licensees will be unable to make their required payments. While we use the best information available in makingour determination, the ultimate recovery of recorded receivables is also dependent upon future economic events and other conditions thatmay be beyond our control. Net provisions for uncollectible franchise and license trade receivables of $7 million, $3 million and $11million were included in Franchise and license expenses in 2011, 2010 and 2009, respectively. The allowance for doubtful accounts, netof the aforementioned provisions, decreased during 2011 primarily due to write-offs and as a result of the LJS and A&W divestitures.Trade receivables that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written offagainst the allowance for doubtful accounts.



58



2011 2010Accounts and notes receivable $ 308 $ 289Allowance for doubtful accounts (22) (33)Accounts and notes receivable, net $ 286 $ 256

Our financing receivables primarily consist of notes receivables and direct financing leases with franchisees which we enter into fromtime to time. As these receivables primarily relate to our ongoing business agreements with franchisees and licensees, we considersuch receivables to have similar risk characteristics and evaluate them as one collective portfolio segment and class for determiningthe allowance for doubtful accounts. We monitor the financial condition of our franchisees and licensees and record provisions forestimated losses on receivables when we believe it probable that our franchisees or licensees will be unable to make their requiredpayments. Balances of notes receivable and direct financing leases due within one year are included in Accounts and Notes Receivablewhile amounts due beyond one year are included in Other assets. Amounts included in Other assets totaled $15 million (net ofan allowance of $4 million) and $57 million (net of an allowance of $30 million) at December 31, 2011 and December 25, 2010,respectively. The decline was primarily due to direct financing lease receivables sold as part of the LJS and A&W divestitures.Financing receivables that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are writtenoff against the allowance for doubtful accounts. Interest income recorded on financing receivables has traditionally been insignificant.

Inventories. We value our inventories at the lower of cost (computed on the first-in, first-out method) or market.

Property, Plant and Equipment. We state property, plant and equipment at cost less accumulated depreciation and amortization. Wecalculate depreciation and amortization on a straight-line basis over the estimated useful lives of the assets as follows: 5 to 25 years forbuildings and improvements, 3 to 20 years for machinery and equipment and 3 to 7 years for capitalized software costs. As discussedabove, we suspend depreciation and amortization on assets related to restaurants that are held for sale.

Leases and Leasehold Improvements. The Company leases land, buildings or both for nearly 6,200 of its restaurants worldwide. Leaseterms, which vary by country and often include renewal options, are an important factor in determining the appropriate accounting forleases including the initial classification of the lease as capital or operating and the timing of recognition of rent expense over the durationof the lease. We include renewal option periods in determining the term of our leases when failure to renew the lease would impose apenalty on the Company in such an amount that a renewal appears to be reasonably assured at the inception of the lease. The primarypenalty to which we are subject is the economic detriment associated with the existence of leasehold improvements which might beimpaired if we choose not to continue the use of the leased property. Leasehold improvements, which are a component of buildingsand improvements described above, are amortized over the shorter of their estimated useful lives or the lease term. We generally do notreceive leasehold improvement incentives upon opening a store that is subject to a lease.

We expense rent associated with leased land or buildings while a restaurant is being constructed whether rent is paid or we are subjectto a rent holiday. Additionally, certain of the Company's operating leases contain predetermined fixed escalations of the minimum rentduring the lease term. For leases with fixed escalating payments and/or rent holidays, we record rent expense on a straight-line basis overthe lease term, including any option periods considered in the determination of that lease term. Contingent rentals are generally based onsales levels in excess of stipulated amounts, and thus are not considered minimum lease payments and are included in rent expense whenattainment of the contingency is considered probable (e.g. when Company sales occur).

Internal Development Costs and Abandoned Site Costs. We capitalize direct costs associated with the site acquisition andconstruction of a Company unit on that site, including direct internal payroll and payroll-related costs. Only those site-specific costsincurred subsequent to the time that the site acquisition is considered probable are capitalized. If we subsequently make a determinationthat a site for which internal development costs have been capitalized will not be acquired or developed, any previously capitalizedinternal development costs are expensed and included in G&A expenses.

Goodwill and Intangible Assets. From time to time, the Company acquires restaurants from one of our Concept’s franchisees oracquires another business. Goodwill from these acquisitions represents the excess of the cost of a business acquired over the net of theamounts assigned to assets acquired, including identifiable intangible assets and liabilities assumed. Goodwill is not amortized and hasbeen assigned to reporting units for purposes of impairment testing. Our reporting units are our operating segments in the U.S. (see Note18), our YRI business units (typically individual countries) and our China Division brands. We evaluate goodwill for impairment on anannual basis or more often if an event occurs or circumstances change that indicate



59



impairments might exist. Goodwill impairment tests consist of a comparison of each reporting unit’s fair value with its carryingvalue. Fair value is the price a willing buyer would pay for a reporting unit, and is generally estimated using discounted expected futureafter-tax cash flows from Company operations and franchise royalties. The discount rate is our estimate of the required rate of returnthat a third-party buyer would expect to receive when purchasing a business from us that constitutes a reporting unit. We believe thediscount rate is commensurate with the risks and uncertainty inherent in the forecasted cash flows. If the carrying value of a reportingunit exceeds its fair value, goodwill is written down to its implied fair value. We have selected the beginning of our fourth quarter as thedate on which to perform our ongoing annual impairment test for goodwill.

If we record goodwill upon acquisition of a restaurant(s) from a franchisee and such restaurant(s) is then sold within two years ofacquisition, the goodwill associated with the acquired restaurant(s) is written off in its entirety. If the restaurant is refranchised twoyears or more subsequent to its acquisition, we include goodwill in the carrying amount of the restaurants disposed of based on therelative fair values of the portion of the reporting unit disposed of in the refranchising and the portion of the reporting unit that will beretained. The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discountedvalue of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction forthe anticipated, future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with therefranchising transition. Appropriate adjustments are made if such franchise agreement includes terms that are determined to not be atprevailing market rates. The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reportingunit and includes the value of franchise agreements. As such, the fair value of the reporting unit retained can include expected cash flowsfrom future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and companyrestaurant operations. As a result, the percentage of a reporting unit’s goodwill that will be written off in a refranchising transactionwill be less than the percentage of the reporting unit’s company restaurants that are refranchised in that transaction and goodwill can beallocated to a reporting unit with only franchise restaurants.

We evaluate the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whetherevents and circumstances continue to support an indefinite useful life. If an intangible asset that is not being amortized is subsequentlydetermined to have a finite useful life, we amortize the intangible asset prospectively over its estimated remaining useful life. Intangibleassets that are deemed to have a definite life are amortized on a straight-line basis to their residual value.

For indefinite-lived intangible assets, our impairment test consists of a comparison of the fair value of an intangible asset with its carryingamount. Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is generally estimated by discountingthe expected future after-tax cash flows associated with the intangible asset. We also perform our annual test for impairment of ourindefinite-lived intangible assets at the beginning of our fourth quarter.

Our definite-lived intangible assets that are not allocated to an individual restaurant are evaluated for impairment whenever events orchanges in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. An intangible asset that isdeemed not recoverable on a undiscounted basis is written down to its estimated fair value, which is our estimate of the price a willingbuyer would pay for the intangible asset based on discounted expected future after-tax cash flows. For purposes of our impairmentanalysis, we update the cash flows that were initially used to value the definite-lived intangible asset to reflect our current estimates andassumptions over the asset’s future remaining life.

Derivative Financial Instruments. We use derivative instruments primarily to hedge interest rate and foreign currency risks. Thesederivative contracts are entered into with financial institutions. We do not use derivative instruments for trading purposes and we haveprocedures in place to monitor and control their use.

We record all derivative instruments on our Consolidated Balance Sheet at fair value. For derivative instruments that are designatedand qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedgeditem attributable to the hedged risk are recognized in the results of operations. For derivative instruments that are designated andqualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of othercomprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affectsearnings. For derivative instruments that are designated and qualify as a net investment hedge, the effective portion of the gain orloss on the derivative instrument is reported in the foreign currency translation component of other comprehensive income (loss). Anyineffective portion of the gain or loss on the derivative instrument for a cash flow hedge or net investment hedge is recorded in the resultsof operations immediately. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the resultsof operations immediately. See Note 12 for a discussion of our use of derivative instruments, management of credit risk inherent inderivative instruments and fair value information.



Common Stock Share Repurchases. From time to time, we repurchase shares of our Common Stock under share repurchase programsauthorized by our Board of Directors. Shares repurchased constitute authorized, but unissued shares under the North Carolina laws underwhich we are incorporated. Additionally, our Common Stock has no par or stated value. Accordingly, we

60



record the full value of share repurchases, upon the trade date, against Common Stock on our Consolidated Balance Sheet except when todo so would result in a negative balance in such Common Stock account. In such instances, on a period basis, we record the cost of anyfurther share repurchases as a reduction in retained earnings. Due to the large number of share repurchases and the increase in the marketvalue of our stock over the past several years, our Common Stock balance is frequently zero at the end of any period. Accordingly, $483million in share repurchases were recorded as a reduction in Retained Earnings in 2011. Our Common Stock balance was such that noshare repurchases impacted Retained Earnings in 2010. There were no shares of our Common Stock repurchased during 2009. See Note16 for additional information.

Pension and Post-retirement Medical Benefits. We measure and recognize the overfunded or underfunded status of our pension andpost-retirement plans as an asset or liability in our Consolidated Balance Sheet as of our fiscal year end. The funded status representsthe difference between the projected benefit obligations and the fair value of plan assets. The projected benefit obligation is the presentvalue of benefits earned to date by plan participants, including the effect of future salary increases, as applicable. The difference betweenthe projected benefit obligations and the fair value of plan assets that has not previously been recognized in our Consolidated Statementof Income is recorded as a component of Accumulated other comprehensive income (loss).

Note 3 – Earnings Per Common Share (“EPS”)

2011 2010 2009

Net Income – YUM! Brands, Inc. $ 1,319 $ 1,158 $ 1,071

Weighted-average common shares outstanding (for basic calculation) 469 474 471Effect of dilutive share-based employee compensation 12 12 12Weighted-average common and dilutive potential common shares outstanding (fordiluted calculation) 481 486 483

Basic EPS $ 2.81 $ 2.44 $ 2.28

Diluted EPS $ 2.74 $ 2.38 $ 2.22Unexercised employee stock options and stock appreciation rights (in millions)excluded from the diluted EPS computation(a) 4.2 2.2 13.3

(a) These unexercised employee stock options and stock appreciation rights were not included in the computation of diluted EPSbecause to do so would have been antidilutive for the periods presented.

Note 4 – Items Affecting Comparability of Net Income and Cash Flows


As part of our plan to transform our U.S. business we took several measures in 2011, 2010 and 2009 ("the U.S. business transformationmeasures"). These measures include: continuation of our U.S. refranchising; General and Administrative ("G&A") productivity initiativesand realignment of resources (primarily severance and early retirement costs); and investments in our U.S. Brands made on behalf of ourfranchisees such as equipment purchases.

For information on our U.S. refranchising, see the Refranchising (Gain) Loss section on pages 63 and 64.

In connection with our G&A productivity initiatives and realignment of resources (primarily severance and early retirement costs),we recorded pre-tax charges of $21 million, $9 million and $16 million in the years ended December 31, 2011, December 25, 2010and December 26, 2009, respectively. The unpaid current liability for the severance portion of these charges was $18 million and $1million as of December 31, 2011 and December 25, 2010, respectively. Severance payments in the years ended December 31, 2011,December 25, 2010 and December 26, 2009 totaled approximately $4 million, $7 million and $26 million, respectively.

Additionally, the Company recognized a reduction to Franchise and license fees and income of $32 million in the year ended December26, 2009 related to investments in our U.S. Brands. These investments reflected our reimbursements to KFC franchisees for installationcosts of ovens for the national launch of Kentucky Grilled Chicken. The reimbursements were recorded as a reduction to Franchise andlicense fees and income as we would not have provided the reimbursements absent the ongoing franchise relationship.



61



As a result of a decline in future profit expectations for our LJS and A&W U.S. businesses due in part to the impact of a reduced emphasison multi-branding, we recorded a non-cash charge of $26 million, which resulted in no related income tax benefit, in the fourth quarterof 2009 to write-off goodwill associated with our LJS and A&W U.S. businesses we owned at the time.

We are not including the impacts of these U.S. business transformation measures in our U.S. segment for performance reporting purposesas we do not believe they are indicative of our ongoing operations. Additionally, we are not including the depreciation reduction of $10million and $9 million for the years ended December 31, 2011 and December 25, 2010, respectively, arising from the impairment of theKFCs offered for sale in the year ended December 25, 2010 within our U.S. segment for performance reporting purposes. Rather, we arerecording such reduction as a credit within unallocated Occupancy and other operating expenses resulting in depreciation expense for theimpaired restaurants we continue to own being recorded in the U.S. segment at the rate at which it was prior to the impairment chargebeing recorded.


During the fourth quarter of 2011 we sold the Long John Silver's and A&W All American Food Restaurants brands to key franchiseleaders and strategic investors in separate transactions.

We recognized $86 million of pre-tax losses and other costs primarily in Closures and impairment (income) expenses during 2011 as aresult of these transactions. Additionally, we recognized $104 million of tax benefits related to tax losses associated with the transactions.

We are not including the pre-tax losses and other costs in our U.S. and YRI segments for performance reporting purposes as we do notbelieve they are indicative of our ongoing operations. In 2011, these businesses contributed 5% and 1% to Franchise and license feesand income for the U.S. and YRI segments, respectively. While these businesses contributed 1% to both the U.S. and YRI segments'Operating Profit in 2011, the impact on our consolidated Operating Profit was not significant.


On May 4, 2009 we acquired an additional 7% ownership in the entity that operates more than 200 KFCs in Shanghai, China for $12million, increasing our ownership to 58%. The acquisition was driven by our desire to increase our management control over the entityand further integrate the business with the remainder of our KFC operations in China. Prior to our acquisition of this additional interest,this entity was accounted for as an unconsolidated affiliate under the equity method of accounting due to the effective participation ofour partners in the significant decisions of the entity that were made in the ordinary course of business. Concurrent with the acquisitionwe received additional rights in the governance of the entity, and thus we began consolidating the entity upon acquisition. As requiredby GAAP, we remeasured our previously held 51% ownership in the entity, which had a recorded value of $17 million at the date ofacquisition, at fair value and recognized a gain of $68 million accordingly. This gain, which resulted in no related income tax expense,was recorded in Other (income) expense on our Consolidated Statement of Income during 2009 and was not allocated to any segment forperformance reporting purposes.

Under the equity method of accounting, we previously reported our 51% share of the net income of the unconsolidated affiliate(after interest expense and income taxes) as Other (income) expense in the Consolidated Statements of Income. We also recorded afranchise fee for the royalty received from the stores owned by the unconsolidated affiliate. From the date of the acquisition, we havereported the results of operations for the entity in the appropriate line items of our Consolidated Statements of Income. We no longerrecorded franchise fee income for these restaurants nor did we report Other (income) expense as we did under the equity method ofaccounting. Net income attributable to our partner’s ownership percentage is recorded in Net Income – noncontrolling interests. For theyear ended December 25, 2010, the consolidation of the existing restaurants upon acquisition increased Company sales by $98 million,decreased Franchise and license fees and income by $6 million and increased Operating Profit by $3 million versus the year endedDecember 26, 2009. The impact of the acquisition on Net Income – YUM! Brands, Inc. was not significant to the year ended December25, 2010.

The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2009 would not have beensignificant.

Little Sheep Initial Investment and Pending Acquisition

During 2009, our China Division paid approximately $103 million, in several tranches, to purchase 27% of the outstanding commonshares of Little Sheep and obtain Board of Directors representation. We began reporting our investment in Little Sheep using the equitymethod of accounting, and this investment is included in Investments in unconsolidated affiliates on our Consolidated



62



Balance Sheets. Equity income recognized from our investment in Little Sheep was not significant in the years ended December 31,2011, December 25, 2010 or December 26, 2009.

In May 2011, we announced our intent to acquire an additional 66% controlling interest in Little Sheep. As a result, we placed $300million in escrow and provided a $300 million letter of credit to demonstrate availability of funds to acquire the additional shares inthis business. The funds placed in escrow were restricted to the pending acquisition of Little Sheep and are separately presented in ourConsolidated Balance Sheet as of December 31, 2011 and in our Consolidated Statement of Cash Flows for the year ended December 31,2011. See Note 21 for information regarding the completion of this acquisition subsequent to year-end.

YRI Acquisitions

On October 31, 2011, YRI acquired 68 KFC restaurants from an existing franchisee in South Africa for $71 million.

On July 1, 2010, we completed the exercise of our option with our Russian partner to purchase their interest in the co-branded Rostik’s-KFC restaurants across Russia and the Commonwealth of Independent States. As a result, we acquired company ownership of 50restaurants and gained full rights and responsibilities as franchisor of 81 restaurants, which our partner previously managed as masterfranchisee. We paid cash of $60 million, net of settlement of a long-term note receivable of $11 million, and assumed long-term debtof $10 million which was subsequently repaid. The remaining balance of the purchase price of $12 million will be paid in cash in July2012.

The impact of consolidating these businesses on all line-items within our Consolidated Statement of Income was insignificant to thecomparison of our year-over-year results.

Refranchising (Gain) Loss

The Refranchising (gain) loss by reportable segment is presented below. We do not allocate such gains and losses to our segments forperformance reporting purposes.

Refranchising (gain) loss2011 2010 2009

China $ (14) $ (8) $ (3)YRI (a)(b)(c) 69 53 11U.S. (d) 17 18 (34)

Worldwide $ 72 $ 63 $ (26)

(a) During the year ended December 31, 2011 we decided to refranchise or close all of our remaining Company-operated Pizza Hutrestaurants in the UK market. While an asset group comprising approximately 350 dine-in restaurants did not meet the criteriafor held-for-sale classification as of December 31, 2011, ourdecision to sell was considered an impairment indicator. As suchwe reviewed this asset group for potential impairment and determined that its carrying value was not recoverable based uponour estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate therestaurants as company units. Accordingly, we wrote this asset group down to our estimate of its fair value, which is based onthe sales price we would expect to receive from a buyer. This fair value determination considered current market conditions,trends in the Pizza Hut UK business, and prices for similar transactions in the restaurant industry and resulted in a non-cash pre-tax write-down of $74 million which was recorded to Refranchising (gain) loss. This impairment charge decreased depreciationexpense versus what would have otherwise been recorded by $3 million in 2011. This depreciation reduction was not allocatedto the YRI segment, resulting in depreciation expense in the YRI segment results continuing to be recorded at the rate at whichit was prior to the impairment charges being recorded for these restaurants. We will continue to review the asset group for anyfurther necessary impairment until the date it is sold. The write-down does not include any allocation of the Pizza Hut UKreporting unit goodwill in the asset group carrying value. This additional non-cash write-down would be recorded, consistentwith our historical policy, if the asset group ultimately meets the criteria to be classified as held for sale. Upon the ultimate saleof the restaurants, depending on the form of the transaction, we could also be required to record a charge for the fair value of anyguarantee of future lease payments for any leases we assign to a franchisee and for the cumulative foreign currency translation



adjustment associated with Pizza Hut UK. The decision to refranchise or close all remaining Pizza Hut restaurants in the UKwas considered to be a goodwill impairment indicator. We determined that the fair value of our

63



Pizza Hut UK reporting unit exceeded its carrying value and as such there was no impairment of the approximately $100 millionin goodwill attributable to the reporting unit.

(b) In the year ended December 25, 2010 we recorded a $52 million loss on the refranchising of our Mexico equity market as wesold all of our Company-owned restaurants, comprised of 222 KFCs and 123 Pizza Huts, to an existing Latin American franchisepartner. The buyer is serving as the master franchisee for Mexico which had 102 KFC and 53 Pizza Hut franchise restaurants atthe time of the transaction. The write-off of goodwill included in this loss was minimal as our Mexico reporting unit includedan insignificant amount of goodwill. This loss did not result in any related income tax benefit.

(c) During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as a result of our decisionto offer to refranchise our KFC Taiwan equity market. During the year ended December 25, 2010 we refranchised all of ourremaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our December 25, 2010 financialstatements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of theselosses resulted in a related income tax benefit. The amount of goodwill write-off was based on the relative fair values of theTaiwan business disposed of and the portion of the business that was retained. The fair value of the business disposed of wasdetermined by reference to the discounted value of the future cash flows expected to be generated by the restaurants and retainedby the franchisee, which include a deduction for the anticipated royalties the franchisee will pay the Company associated withthe franchise agreement entered into in connection with this refranchising transaction. The fair value of the Taiwan businessretained consists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associatedwith the franchise agreement entered into in connection with this refranchising transaction. We believe the terms of the franchiseagreement entered into in connection with the Taiwan refranchising are substantially consistent with market. The remainingcarrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-off, was determined notto be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

(d) U.S. refranchising losses in the years ended December 31, 2011 and December 25, 2010 are primarily due to losses on sales ofand offers to refranchise KFCs in the U.S. There were approximately 250 and 600 KFC restaurants offered for refranchisingas of December 31, 2011 and December 25, 2010, respectively. While we did not yet believe these KFCs met the criteria to beclassified as held for sale, we did, consistent with our historical practice, review the restaurants for impairment as a result of ouroffer to refranchise. We recorded impairment charges where we determined that the carrying value of restaurant groups to besold was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipatedwhile we continue to operate the restaurants as company units. For those restaurant groups deemed impaired, we wrote suchrestaurant groups down to our estimate of their fair values, which were based on the sales price we would expect to receive froma franchisee for each restaurant group. This fair value determination considered current market conditions, real-estate values,trends in the KFC U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurantgroups to date. The non-cash impairment charges that were recorded related to our offers to refranchise these company-operatedKFC restaurants in the U.S. decreased depreciation expense versus what would have otherwise been recorded by $10 million and$9 million in the years ended December 31, 2011 and December 25, 2010, respectively. These depreciation reductions were notallocated to the U.S. segment resulting in depreciation expense in the U.S. segment results continuing to be recorded at the rateat which it was prior to the impairment charges being recorded for these restaurants. We will continue to review the restaurantgroups for any further necessary impairment until the date they are sold. The aforementioned non-cash impairment charges donot include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cashwrite-down would be recorded, consistent with our historical policy, if the restaurant groups, or any subset of the restaurantgroups, ultimately meet the criteria to be classified as held for sale. We will also be required to record a charge for the fair valueof our guarantee of future lease payments for leases we assign to the franchisee upon any sale.

Store Closure and Impairment Activity

Store closure (income) costs and Store impairment charges by reportable segment are presented below. These tables exclude $80 millionof net losses recorded in 2011 related to the LJS and A&W divestitures and a $26 million goodwill impairment charge recorded in 2009related to the LJS and A&W businesses we previously owned. Neither of these amounts were allocated to segments for performancereporting purposes:

64




Store closure (income) costs(a) $ (1) $ 4 $ 4 $ 7Store impairment charges 13 18 17 48

Closure and impairment (income) expenses $ 12 $ 22 $ 21 $ 55


Store closure (income) costs(a) $ — $ 2 $ 3 $ 5Store impairment charges 16 12 14 42



Store closure (income) costs(a) $ (4) $ — $ 13 $ 9Store impairment charges (b) 13 22 33 68


(a) Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Companyrestaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequentadjustments to those reserves and other facility-related expenses from previously closed stores.

(b) The 2009 store impairment charges for YRI include $12 million of goodwill impairment for our Pizza Hut South Korea market.

The following table summarizes the 2011 and 2010 activity related to reserves for remaining lease obligations for closed stores.

BeginningBalance Amounts Used New Decisions

Estimate/DecisionChanges

CTA/Other Ending Balance

2011Activity $ 28 (12) 17 2 (1) $ 342010Activity $ 27 (12) 8 — 5 $ 28

65



Note 5 – Supplemental Cash Flow Data

2011 2010 2009Cash Paid For:

Interest $ 199 $ 190 $ 209Income taxes 349 357 308

Significant Non-Cash Investing and Financing Activities:Capital lease obligations incurred $ 58 $ 16 $ 7Increase (decrease) in accrued capital expenditures 55 51 (17)

Note 6 – Franchise and License Fees and Income

2011 2010 2009Initial fees, including renewal fees $ 68 $ 54 $ 57Initial franchise fees included in Refranchising (gain) loss (21) (15) (17)

47 39 40Continuing fees and rental income 1,686 1,521 1,383

$ 1,733 $ 1,560 $ 1,423

Note 7 – Other (Income) Expense

2011 2010 2009Equity income from investments in unconsolidated affiliates $ (47) $ (42) $ (36)Gain upon consolidation of a former unconsolidated affiliate in China(a) — — (68)Foreign exchange net (gain) loss and other (6) (1) —


(a) See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in Shanghai, China.

Note 8 – Supplemental Balance Sheet Information

Prepaid Expenses and Other Current Assets 2011 2010Income tax receivable $ 150 $ 115Assets held for sale 24 23Other prepaid expenses and current assets 164 131

$ 338 $ 269

Property, Plant and Equipment 2011 2010Land $ 527 $ 542Buildings and improvements 3,856 3,709Capital leases, primarily buildings 316 274Machinery and equipment 2,568 2,578Property, Plant and equipment, gross 7,267 7,103Accumulated depreciation and amortization (3,225) (3,273)

Property, Plant and equipment, net $ 4,042 $ 3,830



66



Depreciation and amortization expense related to property, plant and equipment was $599 million, $565 million and $553 million in 2011,2010 and 2009, respectively.

Accounts Payable and Other Current Liabilities 2011 2010Accounts payable $ 712 $ 540Accrued capital expenditures 229 174Accrued compensation and benefits 440 357Dividends payable 131 118Accrued taxes, other than income taxes 112 95Other current liabilities 250 318

$ 1,874 $ 1,602

Note 9 – Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are as follows:

China YRI U.S. WorldwideBalance as of December 26, 2009

Goodwill, gross $ 82 $ 249 $ 352 $ 683Accumulated impairment losses — (17) (26) (43)Goodwill, net 82 232 326 640Acquisitions (a) — 37 — 37Disposals and other, net(b) 3 (17) (4) (18)

Balance as of December 25, 2010Goodwill, gross 85 269 348 702Accumulated impairment losses — (17) (26) (43)Goodwill, net 85 252 322 659Acquisitions(c) — 32 — 32Disposals and other, net(b) 3 (2) (11) (10)

Balance as of December 31, 2011(d)

Goodwill, gross 88 299 311 698Accumulated impairment losses — (17) — (17)

Goodwill, net $ 88 $ 282 $ 311 $ 681

(a) We recorded goodwill in our YRI segment related to the July 1, 2010 exercise of our option with our Russian partner to purchasetheir interest in the co-branded Rostik’s-KFC restaurants across Russia and the Commonwealth of Independent States. See Note4.

(b) Disposals and other, net includes the impact of foreign currency translation on existing balances and goodwill write-offsassociated with refranchising.

(c) We recorded goodwill in our YRI segment related to the acquisition of 68 stores in South Africa. See Note 4.

(d) As a result of the LJS and A&W divestitures in 2011, we disposed of $26 million of goodwill that was fully impaired in 2009.

67



Intangible assets, net for the years ended 2011 and 2010 are as follows:

2011 2010

Gross Carrying AmountAccumulatedAmortization

Gross CarryingAmount

AccumulatedAmortization

Definite-lived intangible assetsFranchise contract rights $ 130 $ (77) $ 163 $ (83)Trademarks/brands 28 (12) 234 (57)Lease tenancy rights 58 (12) 56 (12)Favorable operating leases 29 (13) 27 (10)Reacquired franchise rights 167 (33) 143 (20)Other 5 (2) 5 (2)

$ 417 $ (149) $ 628 $ (184)

Indefinite-lived intangible assetsTrademarks/brands $ 31 $ 31

Amortization expense for all definite-lived intangible assets was $31 million in 2011, $29 million in 2010 and $25 million in2009. Amortization expense for definite-lived intangible assets will approximate $21 million annually in 2012, $19 million in 2013, $17million in 2014 and $16 million in 2015 and 2016. The LJS and A&W divestitures impacted Trademarks/brands by $164 million (net ofaccumulation amortization of $48 million) and decreased future amortization expense by approximately $8 million annually.

Note 10 – Short-term Borrowings and Long-term Debt

2011 2010Short-term BorrowingsCurrent maturities of long-term debt $ 315 $ 668Current portion of fair value hedge accounting adjustment (See Note 12) 5 5Unsecured International Revolving Credit Facility, expires November 2012 — —Unsecured Revolving Credit Facility, expires November 2012 — —

$ 320 $ 673

Long-term DebtSenior Unsecured Notes $ 3,012 $ 3,257Capital lease obligations (See Note 11) 279 236Other — 64

3,291 3,557Less current maturities of long-term debt (315) (668)Long-term debt excluding long-term portion of hedge accounting adjustment 2,976 2,889Long-term portion of fair value hedge accounting adjustment (See Note 12) 21 26

Long-term debt including hedge accounting adjustment $ 2,997 $ 2,915

Our primary bank credit agreement comprises a $1.15 billion syndicated senior unsecured revolving credit facility (the “Credit Facility”)which matures in November 2012 and includes 24 participating banks with commitments ranging from $20 million to $93 million. Under



the terms of the Credit Facility, we may borrow up to the maximum borrowing limit, less outstanding letters of credit or banker’sacceptances, where applicable. At December 31, 2011, our unused Credit Facility totaled $727 million net of outstanding letters of creditof $423 million. There were no borrowings outstanding under the Credit Facility at December 31,

68



2011. The interest rate for borrowings under the Credit Facility ranges from 0.25% to 1.25% over the London Interbank OfferedRate (“LIBOR”) or is determined by an Alternate Base Rate, which is the greater of the Prime Rate or the Federal Funds Rate plus0.50%. The exact spread over LIBOR or the Alternate Base Rate, as applicable, depends on our performance under specified financialcriteria. Interest on any outstanding borrowings under the Credit Facility is payable at least quarterly.

We also have a $350 million, syndicated revolving International credit facility (the “ICF”) which matures in November 2012 and includes6 banks with commitments ranging from $35 million to $90 million. There was available credit of $350 million and no borrowingsoutstanding under the ICF at the end of 2011. The interest rate for borrowings under the ICF ranges from 0.31% to 1.50% over LIBORor is determined by a Canadian Alternate Base Rate, which is the greater of the Citibank, N.A., Canadian Branch’s publicly announcedreference rate or the “Canadian Dollar Offered Rate” plus 0.50%. The exact spread over LIBOR or the Canadian Alternate Base Rate,as applicable, depends on our performance under specified financial criteria. Interest on any outstanding borrowings under the ICF ispayable at least quarterly.

The Credit Facility and the ICF are unconditionally guaranteed by our principal domestic subsidiaries. Additionally, the ICF isunconditionally guaranteed by YUM. These agreements contain financial covenants relating to maintenance of leverage and fixed chargecoverage ratios and also contain affirmative and negative covenants including, among other things, limitations on certain additionalindebtedness and liens, and certain other transactions specified in the agreement. Given the Company’s balance sheet and cash flows, wewere able to comply with all debt covenant requirements at December 31, 2011 with a considerable amount of cushion.

We are in the process of renewing the Credit Facility and ICF.

The majority of our remaining long-term debt primarily comprises Senior Unsecured Notes with varying maturity dates from 2012through 2037 and stated interest rates ranging from 2.38% to 7.70%. The Senior Unsecured Notes represent senior, unsecured obligationsand rank equally in right of payment with all of our existing and future unsecured unsubordinated indebtedness.

In the fourth quarter of 2011, we issued Chinese Yuan Renminbi 350 million ($56 million) aggregate principal amount 2.38% SeniorUnsecured Notes that are due September 29, 2014. During the third quarter of 2011, we issued $350 million aggregate principal amountof 3.75% 10 year Senior Unsecured Notes. During the second quarter of 2011 we repaid $650 million of Senior Unsecured Notes upontheir maturity primarily with existing cash on hand.

The following table summarizes all Senior Unsecured Notes issued that remain outstanding at December 31, 2011:

Interest Rate

Issuance Date(a) Maturity DatePrincipal Amount (in

millions) Stated Effective(b)

June 2002 July 2012 $ 263 7.70% 8.06%April 2006 April 2016 $ 300 6.25% 6.03%October 2007 March 2018 $ 600 6.25% 6.38%October 2007 November 2037 $ 600 6.88% 7.29%August 2009 September 2015 $ 250 4.25% 4.44%August 2009 September 2019 $ 250 5.30% 5.59%August 2010 November 2020 $ 350 3.88% 4.01%August 2011 November 2021 $ 350 3.75% 3.88%September 2011 September 2014 $ 56 2.38% 2.92%

(a) Interest payments commenced six months after issuance date and are payable semi-annually thereafter.

(b) Includes the effects of the amortization of any (1) premium or discount; (2) debt issuance costs; and (3) gain or loss uponsettlement of related treasury locks and forward-starting interest rate swaps utilized to hedge the interest rate risk prior to thedebt issuance. Excludes the effect of any swaps that remain outstanding as described in Note 12.

69



Both the Credit Facility and the ICF contain cross-default provisions whereby our failure to make any payment on any of our indebtednessin a principal amount in excess of $100 million, or the acceleration of the maturity of any such indebtedness, will constitute a defaultunder such agreement. Our Senior Unsecured Notes provide that the acceleration of the maturity of any of our indebtedness in a principalamount in excess of $50 million will constitute a default under the Senior Unsecured Notes if such acceleration is not annulled, or suchindebtedness is not discharged, within 30 days after notice.

The annual maturities of short-term borrowings and long-term debt as of December 31, 2011, excluding capital lease obligations of $279million and fair value hedge accounting adjustments of $26 million, are as follows:

Year ended:2012 $ 2632013 —2014 562015 2502016 300Thereafter 2,150

Total $ 3,019

Interest expense on short-term borrowings and long-term debt was $184 million, $195 million and $212 million in 2011, 2010 and 2009,respectively.

Note 11 – Leases

At December 31, 2011 we operated more than 7,400 restaurants, leasing the underlying land and/or building in nearly 6,200 of thoserestaurants with the vast majority of our commitments expiring within 20 years from the inception of the lease. Our longest lease expiresin 2151. We also lease office space for headquarters and support functions, as well as certain office and restaurant equipment. We do notconsider any of these individual leases material to our operations. Most leases require us to pay related executory costs, which includeproperty taxes, maintenance and insurance.

Future minimum commitments and amounts to be received as lessor or sublessor under non-cancelable leases are set forth below:

Commitments Lease Receivables

Capital OperatingDirect

Financing Operating2012 $ 65 $ 612 $ 3 $ 492013 27 578 2 422014 26 538 2 392015 26 494 2 352016 26 462 2 31Thereafter 267 2,653 14 139

$ 437 $ 5,337 $ 25 $ 335

At December 31, 2011 and December 25, 2010, the present value of minimum payments under capital leases was $279 million and $236million, respectively. At December 31, 2011, unearned income associated with direct financing lease receivables was $14 million.

The details of rental expense and income are set forth below:

2011 2010 2009Rental expenseMinimum $ 625 $ 565 $ 541Contingent 233 158 123



$ 858 $ 723 $ 664

Rental income $ 66 $ 44 $ 38

70



Note 12 – Derivative Instruments

The Company is exposed to certain market risks relating to its ongoing business operations. The primary market risks managed by usingderivative instruments are interest rate risk and cash flow volatility arising from foreign currency fluctuations.

We enter into interest rate swaps with the objective of reducing our exposure to interest rate risk and lowering interest expense for aportion of our fixed-rate debt. At December 31, 2011, our interest rate swaps outstanding had notional amounts of $550 million and havebeen designated as fair value hedges of a portion of our debt. The Company's interest rate swaps meet the shortcut method requirementsand no ineffectiveness has been recorded.

We enter into foreign currency forward contracts with the objective of reducing our exposure to cash flow volatility arising from foreigncurrency fluctuations associated with certain foreign currency denominated intercompany short-term receivables and payables. Thenotional amount, maturity date, and currency of these contracts match those of the underlying receivables or payables. For thoseforeign currency exchange forward contracts that we have designated as cash flow hedges, we measure ineffectiveness by comparingthe cumulative change in the fair value of the forward contract with the cumulative change in the fair value of the hedged item. AtDecember 31, 2011, foreign currency forward contracts outstanding had a total notional amount of $459 million.

The fair values of derivatives designated as hedging instruments for the years ended December 31, 2011 and December 25, 2010 were:

Fair Value Consolidated Balance Sheet Location2011 2010

Interest Rate Swaps - Asset $ 10 $ 8 Prepaid expenses and other current assetsInterest Rate Swaps - Asset 22 33 Other assetsForeign Currency Forwards - Asset 3 7 Prepaid expenses and other current assetsForeign Currency Forwards - Liability (1) (3) Accounts payable and other current liabilities

Total $ 34 $ 45

The unrealized gains associated with our interest rate swaps that hedge the interest rate risk for a portion of our debt have been reportedas an addition of $5 million and $21 million to Short-term borrowings and Long-term debt, respectively at December 31, 2011 and asan addition of $5 million and $26 million to Short-term borrowings and Long-term debt, respectively at December 25, 2010. During theyears ended December 31, 2011 and December 25, 2010, Interest expense, net was reduced by $24 million and $33 million, respectivelyfor recognized gains on these interest rate swaps.

For our foreign currency forward contracts the following effective portions of gains and losses were recognized into OtherComprehensive Income (“OCI”) and reclassified into income from OCI in the years ended December 31, 2011 and December 25, 2010.

2011 2010Gains (losses) recognized into OCI, net of tax $ 2 $ 32Gains (losses) reclassified from Accumulated OCI into income, net of tax $ 1 $ 33

The gains/losses reclassified from Accumulated OCI into income were recognized as Other income (expense) in our ConsolidatedStatement of Income, largely offsetting foreign currency transaction losses/gains recorded when the related intercompany receivables andpayables were adjusted for foreign currency fluctuations. Changes in fair values of the foreign currency forwards recognized directlyin our results of operations either from ineffectiveness or exclusion from effectiveness testing were insignificant in the years endedDecember 31, 2011 and December 25, 2010.

Additionally, we had a net deferred loss of $12 million and $13 million, net of tax, as of December 31, 2011 and December 25, 2010,respectively within Accumulated OCI due to treasury locks and forward-starting interest rate swaps that have been cash settled, as wellas outstanding foreign currency forward contracts. The majority of this loss arose from the settlement of forward starting interest rateswaps entered into prior to the issuance of our Senior Unsecured Notes due in 2037, and is being reclassified into earnings through 2037to interest expense. In each of 2011, 2010 and 2009 an insignificant amount was reclassified from Accumulated OCI to Interest expense,net as a result of these previously settled cash flow hedges.



71



As a result of the use of derivative instruments, the Company is exposed to risk that the counterparties will fail to meet their contractualobligations. To mitigate the counterparty credit risk, we only enter into contracts with carefully selected major financial institutionsbased upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties. At December 31, 2011and December 25, 2010, all of the counterparties to our interest rate swaps and foreign currency forwards had investment grade ratingsaccording to the three major ratings agencies. To date, all counterparties have performed in accordance with their contractual obligations.

Note 13 – Fair Value Disclosures

The following table presents fair values for those assets and liabilities measured at fair value on a recurring basis and the level within thefair value hierarchy in which the measurements fall. No transfers among the levels within the fair value hierarchy occurred during theyears ended December 31, 2011 or December 25, 2010.

Fair ValueLevel 2011 2010

Foreign Currency Forwards, net 2 $ 2 $ 4Interest Rate Swaps, net 2 32 41Other Investments 1 15 14

Total $ 49 $ 59

The fair value of the Company’s foreign currency forwards and interest rate swaps were determined based on the present value ofexpected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for theduration based upon observable inputs. The other investments include investments in mutual funds, which are used to offset fluctuationsin deferred compensation liabilities that employees have chosen to invest in phantom shares of a Stock Index Fund or Bond IndexFund. The other investments are classified as trading securities and their fair value is determined based on the closing market prices ofthe respective mutual funds as of December 31, 2011 and December 25, 2010.

The following tables present the fair values for those assets and liabilities measured at fair value during 2011 or 2010 on a non-recurringbasis, and that remain on our Consolidated Balance Sheet as of December 31, 2011 or December 25, 2010. Total losses include lossesrecognized from all non-recurring fair value measurements during the years ended December 31, 2011 and December 25, 2010 for assetsand liabilities that remain on our Consolidated Balance Sheet as of December 31, 2011 or December 25, 2010:

Fair Value Measurements Using Total LossesAs of

December 31, 2011 Level 1 Level 2 Level 3 2011Long-lived assets held for use $ 50 — — 50 128

Fair Value Measurements Using Total LossesAs of

December 25, 2010 Level 1 Level 2 Level 3 2010Long-lived assets held for use $ 184 — — 184 110

Long-lived assets held for use presented in the tables above include restaurants or groups of restaurants that were impaired either as aresult of our semi-annual impairment review or when it was more likely than not a restaurant or restaurant group would be refranchised.Of the $128 million in impairment charges shown in the table above for the year ended December 31, 2011, $95 million was included inRefranchising (gain) loss and $33 million was included in Closures and impairment (income) expenses in the Consolidated Statements ofIncome.

Of the $110 million impairment charges shown in the table above for the year ended December 25, 2010, $80 million was included inRefranchising (gain) loss and $30 million was included in Closures and impairment (income) expenses in the Consolidated Statements ofIncome.



72



At December 31, 2011 the carrying values of cash and cash equivalents, accounts receivable and accounts payable approximated theirfair values because of the short-term nature of these instruments. The fair value of notes receivable net of allowances and leaseguarantees less subsequent amortization approximates their carrying value. The Company’s debt obligations, excluding capital leases,were estimated to have a fair value of $3.5 billion, compared to their carrying value of $3.0 billion. We estimated the fair value of debtusing market quotes and calculations based on market rates.

Note 14 – Pension, Retiree Medical and Retiree Savings Plans

Pension Benefits

We sponsor noncontributory defined benefit pension plans covering certain full-time salaried and hourly U.S. employees. The mostsignificant of these plans, the YUM Retirement Plan (the “Plan”), is funded while benefits from the other U.S. plans are paid by theCompany as incurred. During 2001, the plans covering our U.S. salaried employees were amended such that any salaried employeehired or rehired by YUM after September 30, 2001 is not eligible to participate in those plans. Benefits are based on years of serviceand earnings or stated amounts for each year of service. We also sponsor various defined benefit pension plans covering certain ofour non-U.S. employees, the most significant of which are in the UK. Our plans in the UK have previously been amended suchthat new employees are not eligible to participate in these plans. Additionally, in 2011 one of our UK plans was frozen such thatexisting participants can no longer earn future service credits. This resulted in a curtailment gain of $10 million which was credited toAccumulated other comprehensive income (loss).

Obligation and Funded Status at Measurement Date:

The following chart summarizes the balance sheet impact, as well as benefit obligations, assets, and funded status associated with ourU.S. pension plans and significant International pension plans. The actuarial valuations for all plans reflect measurement dates coincidingwith our fiscal year ends.

73



U.S. Pension Plans International Pension Plans2011 2010 2011 2010

Change in benefit obligationBenefit obligation at beginning of year $ 1,108 $ 1,010 $ 187 $ 176

Service cost 24 25 5 6Interest cost 64 62 10 9Participant contributions — — 1 2

Curtailment gain (7) (2) (10) —Settlement loss — 1 — —Special termination benefits 5 1 — —Exchange rate changes — — 1 (9)Benefits paid (40) (57) (2) (4)Settlement payments — (9) — —Actuarial (gain) loss 227 77 (5) 7

Benefit obligation at end of year $ 1,381 $ 1,108 $ 187 $ 187Change in plan assets

Fair value of plan assets at beginning of year $ 907 $ 835 $ 164 $ 141Actual return on plan assets 83 108 10 14Employer contributions 53 35 10 17Participant contributions — — 1 2Settlement payments — (9) — —Benefits paid (40) (57) (2) (4)Exchange rate changes — — — (6)Administrative expenses (5) (5) — —

Fair value of plan assets at end of year $ 998 $ 907 $ 183 $ 164

Funded status at end of year $ (383) $ (201) $ (4) $ (23)

Amounts recognized in the Consolidated Balance Sheet:U.S. Pension Plans International Pension Plans

2011 2010 2011 2010Accrued benefit asset - non-current $ — $ — $ 8 $ —Accrued benefit liability – current (14) (10) — —Accrued benefit liability – non-current (369) (191) (12) (23)

$ (383) $ (201) $ (4) $ (23)

Amounts recognized as a loss in Accumulated Other Comprehensive Income:U.S. Pension Plans International Pension Plans

2011 2010 2011 2010Actuarial net loss $ 540 $ 359 $ 30 $ 46Prior service cost 3 4 — —

$ 543 $ 363 $ 30 $ 46



74



The accumulated benefit obligation for the U.S. and International pension plans was $1,496 million and $1,212 million at December 31,2011 and December 25, 2010, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets:U.S. Pension Plans International Pension Plans

2011 2010 2011 2010Projected benefit obligation $ 1,381 $ 1,108 $ — $ —Accumulated benefit obligation 1,327 1,057 — —Fair value of plan assets 998 907 — —

Information for pension plans with a projected benefit obligation in excess of plan assets:U.S. Pension Plans International Pension Plans

2011 2010 2011 2010Projected benefit obligation $ 1,381 $ 1,108 $ 99 $ 187Accumulated benefit obligation 1,327 1,057 87 155Fair value of plan assets 998 907 87 164

Our funding policy with respect to the U.S. Plan is to contribute amounts necessary to satisfy minimum pension funding requirements,including requirements of the Pension Protection Act of 2006, plus such additional amounts from time to time as are determined to beappropriate to improve the U.S. Plan’s funded status. We currently estimate that we will be required to contribute approximately $30million to the U.S. Plan in 2012.

The funding rules for our pension plans outside of the U.S. vary from country to country and depend on many factors including discountrates, performance of plan assets, local laws and regulations. We do not believe we will be required to make significant contributions toany pension plan outside of the U.S. in 2012.

We do not anticipate any plan assets being returned to the Company during 2012 for any plans.

75



Components of net periodic benefit cost:

U.S. Pension Plans International Pension PlansNet periodic benefit cost 2011 2010 2009 2011 2010 2009Service cost $ 24 $ 25 $ 26 $ 5 $ 6 $ 5Interest cost 64 62 58 10 9 7Amortization of prior service cost(a) 1 1 1 — — —Expected return on plan assets (71) (70) (59) (12) (9) (7)Amortization of net loss 31 23 13 2 2 2

Net periodic benefit cost $ 49 $ 41 $ 39 $ 5 $ 8 $ 7Additional loss recognized due to:

Settlement(b) $ — $ 3 $ 2 $ — $ — $ —Special termination benefits(c) $ 5 $ 1 $ 4 $ — $ — $ —

(a) Prior service costs are amortized on a straight-line basis over the average remaining service period of employees expected toreceive benefits.

(b) Settlement loss results from benefit payments from a non-funded plan exceeding the sum of the service cost and interest cost forthat plan during the year.

(c) Special termination benefits primarily related to the U.S. business transformation measures taken in 2011, 2010 and 2009.

Pension losses in accumulated other comprehensive income (loss):

U.S. Pension PlansInternational Pension

Plans2011 2010 2011 2010

Beginning of year $ 363 $ 346 $ 46 $ 48Net actuarial (gain) loss 219 43 (5) 2Curtailment gain (7) (2) (10) —Amortization of net loss (31) (23) (2) (2)Amortization of prior service cost (1) (1) — —Exchange rate changes — — 1 (2)

End of year $ 543 $ 363 $ 30 $ 46

The estimated net loss for the U.S. and International pension plans that will be amortized from accumulated other comprehensive lossinto net periodic pension cost in 2012 is $63 million and $1 million, respectively. The estimated prior service cost for the U.S. pensionplans that will be amortized from accumulated other comprehensive loss into net periodic pension cost in 2012 is $1 million.

Weighted-average assumptions used to determine benefit obligations at the measurement dates:


Plans2011 2010 2011 2010

Discount rate 4.90% 5.90% 4.75% 5.40%Rate of compensation increase 3.75% 3.75% 3.85% 4.42%

76



Weighted-average assumptions used to determine the net periodic benefit cost for fiscal years:U.S. Pension Plans International Pension Plans

2011 2010 2009 2011 2010 2009Discount rate 5.90% 6.30% 6.50% 5.40% 5.50% 5.51%Long-term rate of return on plan assets 7.75% 7.75% 8.00% 6.64% 6.66% 7.20%Rate of compensation increase 3.75% 3.75% 3.75% 4.41% 4.42% 4.12%

Our estimated long-term rate of return on plan assets represents the weighted-average of expected future returns on the asset categoriesincluded in our target investment allocation based primarily on the historical returns for each asset category, adjusted for an assessmentof current market conditions.

Plan Assets

The fair values of our pension plan assets at December 31, 2011 by asset category and level within the fair value hierarchy are as follows:

U.S. PensionPlans

InternationalPension Plans

Level 1:Cash(a) $ 1 $ —

Level 2:Cash Equivalents(a) 62 —Equity Securities – U.S. Large cap(b) 324 —Equity Securities – U.S. Mid cap(b) 54 —Equity Securities – U.S. Small cap(b) 54 —Equity Securities – Non-U.S.(b) 88 109Fixed Income Securities – U.S. Corporate(b) 263 —Fixed Income Securities – Non-U.S. Corporate(b) — 23Fixed Income Securities – U.S. Government and Government Agencies(c) 164 —Fixed Income Securities – Other(b)(c) 39 11Other Investments(b) — 40

Total fair value of plan assets(d) $ 1,049 $ 183

(a) Short-term investments in money market funds

(b) Securities held in common trusts

(c) Investments held by the Plan are directly held

(d) Excludes net payable of $51 million in the U.S. for purchases of assets included in the above that were settled after year end

Our primary objectives regarding the investment strategy for the Plan’s assets, which make up 85% of total pension plan assets at the2011 measurement date, are to reduce interest rate and market risk and to provide adequate liquidity to meet immediate and futurepayment requirements. To achieve these objectives, we are using a combination of active and passive investment strategies. Our equitysecurities, currently targeted at 55% of our investment mix, consist primarily of low-cost index funds focused on achieving long-termcapital appreciation. We diversify our equity risk by investing in several different U.S. and foreign market index funds. Investing inthese index funds provides us with the adequate liquidity required to fund benefit payments and plan expenses. The fixed income assetallocation, currently targeted at 45% of our mix, is actively managed and consists of long-duration fixed income securities that help toreduce exposure to interest rate variation and to better correlate asset maturities with obligations.

77



A mutual fund held as an investment by the Plan includes shares of YUM common stock valued at $0.7 million at December 31, 2011and $0.6 million at December 25, 2010 (less than 1% of total plan assets in each instance).

Benefit Payments

The benefits expected to be paid in each of the next five years and in the aggregate for the five years thereafter are set forth below:

Year ended:U.S.

Pension PlansInternationalPension Plans

2012 $ 68 $ 12013 50 12014 47 12015 50 12016 51 12017 - 2021 309 8

Expected benefits are estimated based on the same assumptions used to measure our benefit obligation on the measurement date andinclude benefits attributable to estimated future employee service.

Retiree Medical Benefits

Our post-retirement plan provides health care benefits, principally to U.S. salaried retirees and their dependents, and includes retiree cost-sharing provisions. During 2001, the plan was amended such that any salaried employee hired or rehired by YUM after September 30,2001 is not eligible to participate in this plan. Employees hired prior to September 30, 2001 are eligible for benefits if they meet age andservice requirements and qualify for retirement benefits. We fund our post-retirement plan as benefits are paid.

At the end of 2011 and 2010, the accumulated post-retirement benefit obligation was $86 million and $78 million, respectively. Theactuarial loss recognized in Accumulated other comprehensive loss was $12 million at the end of 2011 and $6 million at the end of2010. The net periodic benefit cost recorded in 2011, 2010 and 2009 was $6 million, $6 million and $7 million, respectively, the majorityof which is interest cost on the accumulated post-retirement benefit obligation. 2011, 2010 and 2009 costs each included less than $1million of special termination benefits primarily related to the U.S. business transformation measures described in Note 4. The weighted-average assumptions used to determine benefit obligations and net periodic benefit cost for the post-retirement medical plan are identicalto those as shown for the U.S. pension plans. Our assumed heath care cost trend rates for the following year as of 2011 and 2010 are7.5% and 7.7%, respectively, with expected ultimate trend rates of 4.5% reached in 2028.

There is a cap on our medical liability for certain retirees. The cap for Medicare-eligible retirees was reached in 2000 and the cap fornon-Medicare eligible retirees is expected to be reached in 2014; once the cap is reached, our annual cost per retiree will not increase. Aone-percentage-point increase or decrease in assumed health care cost trend rates would have less than a $1 million impact on totalservice and interest cost and on the post-retirement benefit obligation. The benefits expected to be paid in each of the next five years areapproximately $7 million and in aggregate for the five years thereafter are $29 million.

Retiree Savings Plan

We sponsor a contributory plan to provide retirement benefits under the provisions of Section 401(k) of the Internal Revenue Code(the “401(k) Plan”) for eligible U.S. salaried and hourly employees. Participants are able to elect to contribute up to 75% of eligiblecompensation on a pre-tax basis. Participants may allocate their contributions to one or any combination of multiple investment optionsor a self-managed account within the 401(k) Plan. We match 100% of the participant’s contribution to the 401(k) Plan up to 6% ofeligible compensation. We recognized as compensation expense our total matching contribution of $14 million in 2011, $15 million in2010 and $16 million in 2009.



78



Note 15 – Share-based and Deferred Compensation Plans

Overview

At year end 2011, we had four stock award plans in effect: the YUM! Brands, Inc. Long-Term Incentive Plan and the 1997 Long-TermIncentive Plan (collectively the “LTIPs”), the YUM! Brands, Inc. Restaurant General Manager Stock Option Plan (“RGM Plan”) and theYUM! Brands, Inc. SharePower Plan (“SharePower”). Under all our plans, the exercise price of stock options and stock appreciationrights (“SARs”) granted must be equal to or greater than the average market price or the ending market price of the Company’s stock onthe date of grant.

Potential awards to employees and non-employee directors under the LTIPs include stock options, incentive stock options, SARs,restricted stock, stock units, restricted stock units (“RSUs”), performance restricted stock units, performance share units (“PSUs”) andperformance units. Through December 31, 2011, we have issued only stock options, SARs, RSUs and PSUs under the LTIPs. Whileawards under the LTIPs can have varying vesting provisions and exercise periods, outstanding awards under the LTIPs vest in periodsranging from immediate to 5 years. Stock options and SARs expire ten years after grant.

Potential awards to employees under the RGM Plan include stock options, SARs, restricted stock and RSUs. Through December 31,2011, we have issued only stock options and SARs under this plan. RGM Plan awards granted have a four-year cliff vesting periodand expire ten years after grant. Certain RGM Plan awards are granted upon attainment of performance conditions in the previousyear. Expense for such awards is recognized over a period that includes the performance condition period.

Potential awards to employees under SharePower include stock options, SARs, restricted stock and RSUs. Through December 31, 2011,we have issued only stock options and SARs under this plan. These awards generally vest over a period of four years and expire nolonger than ten years after grant.

At year end 2011, approximately 19 million shares were available for future share-based compensation grants under the above plans.

Our Executive Income Deferral (“EID”) Plan allows participants to defer receipt of a portion of their annual salary and all or a portionof their incentive compensation. As defined by the EID Plan, we credit the amounts deferred with earnings based on the investmentoptions selected by the participants. These investment options are limited to cash, phantom shares of our Common Stock, phantomshares of a Stock Index Fund and phantom shares of a Bond Index Fund. Investments in cash and phantom shares of both index fundswill be distributed in cash at a date as elected by the employee and therefore are classified as a liability on our Consolidated BalanceSheets. We recognize compensation expense for the appreciation or the depreciation, if any, of investments in cash and both of the indexfunds. Deferrals into the phantom shares of our Common Stock will be distributed in shares of our Common Stock, under the LTIPs, at adate as elected by the employee and therefore are classified in Common Stock on our Consolidated Balance Sheets. We do not recognizecompensation expense for the appreciation or the depreciation, if any, of investments in phantom shares of our Common Stock. OurEID plan also allows participants to defer incentive compensation to purchase phantom shares of our Common Stock and receive a 33%Company match on the amount deferred. Deferrals receiving a match are similar to a RSU award in that participants will generally forfeitboth the match and incentive compensation amounts deferred if they voluntarily separate from employment during a vesting period that istwo years. We expense the intrinsic value of the match and the incentive compensation over the requisite service period which includesthe vesting period.

Historically, the Company has repurchased shares on the open market in excess of the amount necessary to satisfy award exercises andexpects to continue to do so in 2012.

Award Valuation

We estimated the fair value of each stock option and SAR award as of the date of grant using the Black-Scholes option-pricing modelwith the following weighted-average assumptions:

2011 2010 2009Risk-free interest rate 2.0% 2.4% 1.9%Expected term (years) 5.9 6.0 5.9Expected volatility 28.2% 30.0% 32.3%Expected dividend yield 2.0% 2.5% 2.6%



79



We believe it is appropriate to group our stock option and SAR awards into two homogeneous groups when estimating expectedterm. These groups consist of grants made primarily to restaurant-level employees under the RGM Plan, which cliff-vest after four yearsand expire ten years after grant, and grants made to executives under our other stock award plans, which typically have a graded vestingschedule of 25% per year over four years and expire ten years after grant. We use a single weighted-average term for our awards thathave a graded vesting schedule. Based on analysis of our historical exercise and post-vesting termination behavior, we have determinedthat our restaurant-level employees and our executives exercised the awards on average after five years and six years, respectively.

When determining expected volatility, we consider both historical volatility of our stock as well as implied volatility associated with ourtraded options. The expected dividend yield is based on the annual dividend yield at the time of grant.

The fair values of RSU and PSU awards are based on the closing price of our stock on the date of grant.

Award Activity

Stock Options and SARs

Shares(in thousands)

Weighted-AverageExercise

Price

Weighted- AverageRemaining

Contractual Term

AggregateIntrinsic Value (in

millions)Outstanding at the beginning of the year 36,438 $ 26.91Granted 5,023 49.59Exercised (6,645) 20.33Forfeited or expired (1,308) 35.52

Outstanding at the end of the year 33,508 (a) $ 31.28 5.96 $ 929

Exercisable at the end of the year 18,709 $ 26.00 4.48 $ 618

(a) Outstanding awards include 8,161 options and 25,347 SARs with average exercise prices of $21.56 and $34.41, respectively.

The weighted-average grant-date fair value of stock options and SARs granted during 2011, 2010 and 2009 was $11.78, $8.21 and $7.29,respectively. The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2011, December 25,2010 and December 26, 2009, was $226 million, $259 million and $217 million, respectively.

As of December 31, 2011, there was $82 million of unrecognized compensation cost related to stock options and SARs, which will bereduced by any forfeitures that occur, related to unvested awards that is expected to be recognized over a remaining weighted-averageperiod of approximately 2.5 years. The total fair value at grant date of awards vested during 2011, 2010 and 2009 was $43 million, $47million and $52 million, respectively.

RSUs and PSUs

As of December 31, 2011, there was $10 million of unrecognized compensation cost related to 1.0 million unvested RSUs and PSUs.

80



Impact on Net Income

The components of share-based compensation expense and the related income tax benefits are shown in the following table:

2011 2010 2009Options and SARs $ 49 $ 40 $ 48Restricted Stock Units 5 5 7Performance Share Units 5 2 1Total Share-based Compensation Expense $ 59 $ 47 $ 56Deferred Tax Benefit recognized $ 18 $ 13 $ 17

EID compensation expense not share-based $ 2 $ 4 $ 4

Cash received from stock option exercises for 2011, 2010 and 2009, was $59 million, $102 million and $113 million, respectively. Taxbenefits realized on our tax returns from tax deductions associated with stock options and SARs exercised for 2011, 2010 and 2009 totaled$72 million, $82 million and $68 million, respectively.

Note 16 – Shareholders’ Equity

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during 2011 and 2010. All amounts excludeapplicable transaction fees. There were no shares of our Common Stock repurchased during 2009.

Shares Repurchased(thousands)

Dollar Value of SharesRepurchased

Authorization Date 2011 2010 2009 2011 2010 2009November 2011 — — — $ — $ — $ —January 2011 10,864 — — 562 — —March 2010 3,441 2,161 — 171 107 —September 2009 — 7,598 — — 283 —

Total 14,305 (a) 9,759 (a) — $ 733 (a) $ 390 (a) $ —

(a) 2011 amount excludes and 2010 amount includes the effect of $19 million in share repurchases (0.4 million shares) with tradedates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010 fiscal year.

As of December 31, 2011, we have $188 million available for future repurchases under our January 2011 share repurchaseauthorization. Additionally, on November 18, 2011, our Board of Directors authorized share repurchases through May 2013 of up to $750million (excluding applicable transaction fees) of our outstanding Common Stock. No shares have been repurchased under the November2011 authorization as of December 31, 2011.

Accumulated Other Comprehensive Income (Loss) – Comprehensive income is Net Income plus certain other items that are recordeddirectly to Shareholders’ Equity. The following table gives further detail regarding the composition of accumulated other comprehensiveloss at December 31, 2011 and December 25, 2010. Refer to Note 14 for additional information about our pension and post-retirementplan accounting and Note 12 for additional information about our derivative instruments.

2011 2010Foreign currency translation adjustment $ 140 $ 55Pension and post-retirement losses, net of tax (375) (269)Net unrealized losses on derivative instruments, net of tax (12) (13)

Total accumulated other comprehensive loss $ (247) $ (227)



81



Note 17 – Income Taxes

U.S. and foreign income before taxes are set forth below:

2011 2010 2009U.S. $ 266 $ 345 $ 269Foreign 1,393 1,249 1,127

$ 1,659 $ 1,594 $ 1,396

The details of our income tax provision (benefit) are set forth below:

2011 2010 2009Current: Federal $ 78 $ 155 $ (21)

Foreign 374 356 251State 9 15 11

$ 461 $ 526 241

Deferred: Federal (83) (82) 92Foreign (40) (29) (30)State (14) 1 10

(137) (110) 72$ 324 $ 416 $ 313

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to our effective tax rate is set forth below:

2011 2010 2009U.S. federal statutory rate $ 580 35.0 % $ 558 35.0 % $ 489 35.0 %State income tax, net of federal tax benefit 2 0.1 12 0.7 14 1.0Statutory rate differential attributable to foreignoperations (218) (13.1) (235) (14.7) (159) (11.4)Adjustments to reserves and prior years 24 1.4 55 3.5 (9) (0.6)Net benefit from LJS and A&W divestitures (72) (4.3) — — — —Change in valuation allowances 22 1.3 22 1.4 (9) (0.7)Other, net (14) (0.9) 4 0.2 (13) (0.9)

Effective income tax rate $ 324 19.5 % $ 416 26.1 % $ 313 22.4 %

Statutory rate differential attributable to foreign operations. This item includes local taxes, withholding taxes, and shareholder-leveltaxes, net of foreign tax credits. The favorable impact is primarily attributable to a majority of our income being earned outside of theU.S. where tax rates are generally lower than the U.S. rate.

In 2011 and 2010, the benefit was positively impacted by the recognition of excess foreign tax credits generated by our intent to repatriatecurrent year foreign earnings.

In 2009, the benefit was negatively impacted by withholding taxes associated with the distribution of intercompany dividends that wereonly partially offset by related foreign tax credits generated during the year.

Adjustments to reserves and prior years. This item includes: (1) the effects of reconciling income tax amounts recorded in ourConsolidated Statements of Income to amounts reflected on our tax returns, including any adjustments to the Consolidated Balance



Sheets; and (2) changes in tax reserves, including interest thereon, established for potential exposure we may incur if a taxing authoritytakes a position on a matter contrary to our position. We evaluate these amounts on a quarterly basis to insure that they have beenappropriately adjusted for audit settlements and other events we believe may impact the outcome. The impact of certain effects orchanges may offset items reflected in the ‘Statutory rate differential attributable to foreign operations’ line.

82



In 2009, this item included out-of-year adjustments which lowered our effective tax rate by 1.6 percentage points.

Change in valuation allowance. This item relates to changes for deferred tax assets generated or utilized during the current year andchanges in our judgment regarding the likelihood of using deferred tax assets that existed at the beginning of the year. The impactof certain changes may offset items reflected in the ‘Statutory rate differential attributable to foreign operations’ line. The Companyconsiders all available positive and negative evidence, including the amount of taxable income and periods over which it must be earned,actual levels of past taxable income and known trends and events or transactions expected to affect future levels of taxable income.

In 2011, $22 million of net tax expense was driven by $15 million for valuation allowances recorded against deferred tax assets generatedduring the current year and $7 million of tax expense resulting from a change in judgment regarding the future use of certain foreigndeferred tax assets that existed at the beginning of the year. These amounts exclude $45 million in valuation allowance additions relatedto capital losses recognized as a result of the LJS and A&W divestitures, which are presented within Net Benefit from LJS and A&Wdivestitures.

In 2010, the $22 million of net tax expense was driven by $25 million for valuation allowances recorded against deferred tax assetsgenerated during the current year. This expense was partially offset by a $3 million tax benefit resulting from a change in judgmentregarding the future use of U.S. state deferred tax assets that existed at the beginning of the year.

In 2009, the $9 million net tax benefit was driven by $25 million of benefit resulting from a change in judgment regarding the futureuse of foreign deferred tax assets that existed at the beginning of the year. This benefit was partially offset by $16 million for valuationallowances recorded against deferred tax assets generated during the year.

Net benefit from LJS and A&W divestitures. This item includes a one-time $117 million tax benefit, including approximately $8 millionstate benefit, recognized on the LJS and A&W divestitures in 2011, partially offset by $45 million of valuation allowance, includingapproximately $4 million state expense, related to capital loss carryforwards recognized as a result of the divestitures. In addition, werecorded $32 million of tax benefits on $86 million of pre-tax losses and other costs, which resulted in $104 million of total net taxbenefits related to the divestitures.

Other. This item primarily includes the impact of permanent differences related to current year earnings and U.S. tax credits.

In 2009, this item was positively impacted by a one-time pre-tax gain of approximately $68 million, with no related income tax expense,recognized on our acquisition of additional interest in, and consolidation of, the entity that operates KFC in Shanghai, China. This waspartially offset by a pre-tax U.S. goodwill impairment charge of approximately $26 million, with no related income tax benefit.

The details of 2011 and 2010 deferred tax assets (liabilities) are set forth below:

2011 2010Operating losses and tax credit carryforwards $ 590 $ 335Employee benefits 259 171Share-based compensation 106 102Self-insured casualty claims 47 50Lease-related liabilities 137 166Various liabilities 72 89Deferred income and other 49 97

Gross deferred tax assets 1,260 1,010Deferred tax asset valuation allowances (368) (306)

Net deferred tax assets $ 892 $ 704Intangible assets, including goodwill $ (147) $ (211)Property, plant and equipment (92) (108)Other (53) (29)

Gross deferred tax liabilities $ (292) $ (348)



Net deferred tax assets (liabilities) $ 600 $ 356

83



Reported in Consolidated Balance Sheets as:Deferred income taxes – current $ 112 $ 61Deferred income taxes – long-term 549 366Accounts payable and other current liabilities (16) (20)Other liabilities and deferred credits (45) (51)

$ 600 $ 356

We have investments in foreign subsidiaries where the carrying values for financial reporting exceed the tax basis. We have not provideddeferred tax on the portion of the excess that we believe is essentially permanent in duration. This amount may become taxableupon an actual or deemed repatriation of assets from the subsidiaries or a sale or liquidation of the subsidiaries. We estimate thatour total temporary difference upon which we have not provided deferred tax is approximately $1.7 billion at December 31, 2011. Adetermination of the deferred tax liability on this amount is not practicable.

At December 31, 2011, the Company has foreign operating and capital loss carryforwards of $1.0 billion and U.S. federal and stateoperating loss and tax credit carryforwards of $2.0 billion. These losses are being carried forward in jurisdictions where we are permittedto use tax losses from prior periods to reduce future taxable income and will expire as follows:

Year of Expiration2012 2013-2016 2017-2031 Indefinitely Total

Foreign $ 4 $ 66 $ 136 $ 833 $ 1,039U.S. federal and state 22 192 1,770 5 1,989

$ 26 $ 258 $ 1,906 $ 838 $ 3,028

We recognize the benefit of positions taken or expected to be taken in tax returns in the financial statements when it is more likely thannot that the position would be sustained upon examination by tax authorities. A recognized tax position is measured at the largest amountof benefit that is greater than fifty percent likely of being realized upon settlement.

The Company had $348 million and $308 million of unrecognized tax benefits at December 31, 2011 and December 25, 2010,respectively, $197 million and $227 million of which, if recognized, would affect the 2011 and 2010 effective income tax rates,respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

2011 2010Beginning of Year $ 308 $ 301

Additions on tax positions - current year 85 45Additions for tax positions - prior years 38 35Reductions for tax positions - prior years (58) (19)Reductions for settlements (8) (41)Reductions due to statute expiration (22) (10)Foreign currency translation adjustment 5 (3)

End of Year $ 348 $ 308

The Company believes it is reasonably possible its unrecognized tax benefits may decrease by approximately $89 million in the nexttwelve months, including approximately $39 million which, if recognized upon audit settlement or statute expiration, would affect the2012 effective tax rate. Each position is individually insignificant.

The Company’s income tax returns are subject to examination in the U.S. federal jurisdiction and numerous foreign jurisdictions. Thefollowing table summarizes our major jurisdictions and the tax years that are either currently under audit or remain open and subject toexamination:



84



Jurisdiction Open Tax YearsU.S. Federal 2004 – 2011China 2008 – 2011United Kingdom 2003 – 2011Mexico 2005 – 2011Australia 2007 – 2011

In addition, the Company is subject to various U.S. state income tax examinations, for which, in the aggregate, we had significantunrecognized tax benefits at December 31, 2011, each of which is individually insignificant.

The accrued interest and penalties related to income taxes at December 31, 2011 and December 25, 2010 are set forth below:

2011 2010Accrued interest and penalties $ 53 $ 48

During 2011, 2010 and 2009, a net benefit of $2 million, expense of $13 million and expense of $6 million, respectively, for interest andpenalties was recognized in our Consolidated Statements of Income as components of its income tax provision.

On June 23, 2010, the Company received a Revenue Agent Report from the Internal Revenue Service (the “IRS”) relating to itsexamination of our U.S. federal income tax returns for fiscal years 2004 through 2006. The IRS has proposed an adjustment toincrease the taxable value of rights to intangibles used outside the U.S. that YUM transferred to certain of its foreign subsidiaries. Theproposed adjustment would result in approximately $700 million of additional taxes plus net interest to date of approximately $170million. Furthermore, if the IRS prevails it is likely to make similar claims for years subsequent to fiscal 2006. The potential additionaltaxes for these later years, through 2011, computed on a similar basis to the 2004-2006 additional taxes, would be approximately $350million plus net interest to date of approximately $25 million.

We believe that the Company has properly reported taxable income and paid taxes in accordance with applicable laws and that theproposed adjustment is inconsistent with applicable income tax laws, Treasury Regulations and relevant case law. We intend to defendour position vigorously and have filed a protest with the IRS. As the final resolution of the proposed adjustment remains uncertain, theCompany will continue to provide for its position in this matter based on the tax benefit that we believe is the largest amount that ismore likely than not to be realized upon settlement of this issue. There can be no assurance that payments due upon final resolutionof this issue will not exceed our currently recorded reserve and such payments could have a material adverse effect on our financialposition. Additionally, if increases to our reserves are deemed necessary due to future developments related to this issue, such increasescould have a material, adverse effect on our results of operations as they are recorded. The Company does not expect resolution of thismatter within twelve months and cannot predict with certainty the timing of such resolution.

85



Note 18 – Reportable Operating Segments

We are principally engaged in developing, operating, franchising and licensing the worldwide KFC, Pizza Hut and Taco Bell concepts.KFC, Pizza Hut and Taco Bell operate in 115, 97, and 27 countries and territories, respectively. Our five largest international marketsbased on operating profit in 2011 are China, Asia Franchise, Australia, Latin America Franchise, and United Kingdom.

We identify our operating segments based on management responsibility. The China Division includes only mainland China and YRIincludes the remainder of our international operations. We consider our KFC, Pizza Hut and Taco Bell operating segments in the U.S. tobe similar and therefore have aggregated them into a single reportable operating segment. Our U.S. and YRI segment results also includethe operating results of our LJS and A&W businesses while we owned those businesses.

Revenues2011 2010 2009

China $ 5,566 $ 4,135 $ 3,407YRI 3,274 3,088 2,988U.S. 3,786 4,120 4,473Unallocated Franchise and license fees and income(a)(b) — — (32)

$ 12,626 $ 11,343 $ 10,836

Operating Profit; Interest Expense, Net; andIncome Before Income Taxes

2011 2010 2009China (c) $ 908 $ 755 $ 596YRI 673 589 497U.S. 589 668 647Unallocated Franchise and license fees and income(a)(b) — — (32)Unallocated Occupancy and other(b)(d) 14 9 —Unallocated and corporate expenses(b)(e) (223) (194) (189)Unallocated Closures and impairment expense(b)(f) (80) — (26)Unallocated Other income (expense)(b)(g) 6 5 71Unallocated Refranchising gain (loss)(b)(h) (72) (63) 26Operating Profit 1,815 1,769 1,590Interest expense, net (156) (175) (194)

Income Before Income Taxes $ 1,659 $ 1,594 $ 1,396

Depreciation and Amortization2011 2010 2009

China $ 257 $ 225 $ 184YRI 186 159 165U.S. 177 201 216Corporate(d) 8 4 15

$ 628 $ 589 $ 580

86



Capital Spending2011 2010 2009

China $ 405 $ 272 $ 271YRI 256 259 251U.S. 256 241 270Corporate 23 24 5

$ 940 $ 796 $ 797

Identifiable Assets2011 2010 2009

China (i) $ 2,527 $ 2,289 $ 1,632YRI 2,899 2,649 2,448U.S. 2,070 2,398 2,575Corporate(j) 1,338 980 493

$ 8,834 $ 8,316 $ 7,148

Long-Lived Assets(k)

2011 2010 2009China $ 1,546 $ 1,269 $ 1,172YRI 1,635 1,548 1,524U.S. 1,805 2,095 2,260Corporate 36 52 45

$ 5,022 $ 4,964 $ 5,001

(a) Amount consists of reimbursements to KFC franchisees for installation costs of ovens for the national launch of KentuckyGrilled Chicken. See Note 4.

(b) Amounts have not been allocated to the U.S., YRI or China Division segments for performance reporting purposes.

(c) Includes equity income from investments in unconsolidated affiliates of $47 million, $42 million and $36 million in 2011, 2010and 2009, respectively, for China.

(d) 2011 and 2010 include depreciation reductions arising from the impairment of KFC restaurants we offered to sell of $10 millionand $9 million, respectively. 2011 includes a depreciation reduction arising from the impairment of Pizza Hut UK restaurantswe decided to sell in 2011 of $3 million. See Note 4.

(e) 2011, 2010 and 2009 include approximately $21 million, $9 million and $16 million, respectively, of charges relating to U.S.general and administrative productivity initiatives and realignment of resources. See Note 4.

(f) 2011 represents net losses resulting from the LJS and A&W divestitures. 2009 includes a $26 million charge to write-offgoodwill associated with our LJS and A&W businesses in the U.S. See Note 9.

(g) 2009 includes a $68 million gain related to the acquisition of additional interest in and consolidation of a former unconsolidatedaffiliate in China. See Note 4.

(h) See Note 4 for further discussion of Refranchising gain (loss).

(i) China includes investments in 4 unconsolidated affiliates totaling $167 million, $154 million and $144 million, for 2011, 2010and 2009, respectively.



87



(j) Primarily includes cash, deferred tax assets and property, plant and equipment, net, related to our office facilities.

(k) Includes property, plant and equipment, net, goodwill, and intangible assets, net.

See Note 4 for additional operating segment disclosures related to impairment and store closure (income) costs.

Note 19 – Contingencies

Lease Guarantees

As a result of (a) assigning our interest in obligations under real estate leases as a condition to the refranchising of certain Companyrestaurants; (b) contributing certain Company restaurants to unconsolidated affiliates; and (c) guaranteeing certain other leases, weare frequently contingently liable on lease agreements. These leases have varying terms, the latest of which expires in 2065. As ofDecember 31, 2011, the potential amount of undiscounted payments we could be required to make in the event of non-payment by theprimary lessee was approximately $625 million. The present value of these potential payments discounted at our pre-tax cost of debt atDecember 31, 2011 was approximately $550 million. Our franchisees are the primary lessees under the vast majority of these leases. Wegenerally have cross-default provisions with these franchisees that would put them in default of their franchise agreement in the eventof non-payment under the lease. We believe these cross-default provisions significantly reduce the risk that we will be required to makepayments under these leases. Accordingly, the liability recorded for our probable exposure under such leases at December 31, 2011 andDecember 25, 2010 was not material.

Franchise Loan Pool and Equipment Guarantees

We have agreed to provide financial support, if required, to a variable interest entity that operates a franchisee lending program usedprimarily to assist franchisees in the development of new restaurants in the U.S. and, to a lesser extent, in connection with the Company’srefranchising programs. As part of this agreement, we have provided a partial guarantee of approximately $14 million and two lettersof credit totaling approximately $23 million in support of the franchisee loan program at December 31, 2011. One such letter of creditcould be used if we fail to meet our obligations under our guarantee. The other letter of credit could be used, in certain circumstances,to fund our participation in the funding of the franchisee loan program. The total loans outstanding under the loan pool were $63 millionat December 31, 2011 with an additional $17 million available for lending at December 31, 2011. We have determined that we are notrequired to consolidate this entity as we share the power to direct this entity’s lending activity with other parties.

In addition to the guarantee described above, YUM has provided guarantees of $17 million on behalf of franchisees for several financingprograms related to specific initiatives. The total loans outstanding under these financing programs were approximately $32 million atDecember 31, 2011.

Unconsolidated Affiliates Guarantees

From time to time we have guaranteed certain lines of credit and loans of unconsolidated affiliates. At December 31, 2011 there are noguarantees outstanding for unconsolidated affiliates. Our unconsolidated affiliates had total revenues of approximately $1.1 billion forthe year ended December 31, 2011 and assets and debt of approximately $525 million and $75 million, respectively, at December 31,2011.

Insurance Programs

We are self-insured for a substantial portion of our current and prior years’ coverage including property and casualty losses. To mitigatethe cost of our exposures for certain property and casualty losses, we self-insure the risks of loss up to defined maximum per occurrenceretentions on a line-by-line basis. The Company then purchases insurance coverage, up to a certain limit, for losses that exceed theself-insurance per occurrence retention. The insurers’ maximum aggregate loss limits are significantly above our actuarially determinedprobable losses; therefore, we believe the likelihood of losses exceeding the insurers’ maximum aggregate loss limits is remote.

The following table summarizes the 2011 and 2010 activity related to our self-insured property and casualty reserves as of December 31,2011.

88



BeginningBalance Expense Payments

EndingBalance

2011 Activity $150 55 (65) $ 1402010 Activity $173 46 (69) $ 150

In the U.S. and in certain other countries, we are also self-insured for healthcare claims and long-term disability for eligible participatingemployees subject to certain deductibles and limitations. We have accounted for our retained liabilities for property and casualty losses,healthcare and long-term disability claims, including reported and incurred but not reported claims, based on information provided byindependent actuaries.

Due to the inherent volatility of actuarially determined property and casualty loss estimates, it is reasonably possible that we couldexperience changes in estimated losses which could be material to our growth in quarterly and annual Net income. We believe thatwe have recorded reserves for property and casualty losses at a level which has substantially mitigated the potential negative impact ofadverse developments and/or volatility.

Legal Proceedings

We are subject to various claims and contingencies related to lawsuits, real estate, environmental and other matters arising in the normalcourse of business.

On November 26, 2001, Kevin Johnson, a former Long John Silver's (“LJS”) restaurant manager, filed a collective action against LJSin the United States District Court for the Middle District of Tennessee alleging violation of the Fair Labor Standards Act (“FLSA”) onbehalf of himself and allegedly similarly-situated LJS general and assistant restaurant managers. Johnson alleged that LJS violated theFLSA by perpetrating a policy and practice of seeking monetary restitution from LJS employees, including Restaurant General Managers(“RGMs”) and Assistant Restaurant General Managers (“ARGMs”), when monetary or property losses occurred due to knowing andwillful violations of LJS policies that resulted in losses of company funds or property, and that LJS had thus improperly classified itsRGMs and ARGMs as exempt from overtime pay under the FLSA. Johnson sought overtime pay, liquidated damages, and attorneys' feesfor himself and his proposed class.

LJS moved the Tennessee district court to compel arbitration of Johnson's suit. The district court granted LJS's motion on June 7, 2004,and the United States Court of Appeals for the Sixth Circuit affirmed on July 5, 2005.

On December 19, 2003, while the arbitrability of Johnson's claims was being litigated, former LJS managers Erin Cole and NickKaufman, represented by Johnson's counsel, initiated arbitration with the American Arbitration Association (the “Cole Arbitration”).The Cole Claimants sought a collective arbitration on behalf of the same putative class as alleged in the Johnson lawsuit and alleged thesame underlying claims.

On June 15, 2004, the arbitrator in the Cole Arbitration issued a Clause Construction Award, finding that LJS's Dispute Resolution Policydid not prohibit Claimants from proceeding on a collective or class basis. LJS moved unsuccessfully to vacate the Clause ConstructionAward in federal district court in South Carolina. On September 19, 2005, the arbitrator issued a Class Determination Award, finding,inter alia, that a class would be certified in the Cole Arbitration on an “opt-out” basis, rather than as an “opt-in” collective action asspecified by the FLSA.

On January 20, 2006, the district court denied LJS's motion to vacate the Class Determination Award and the United States Court ofAppeals for the Fourth Circuit affirmed the district court's decision on January 28, 2008. A petition for a writ of certiorari filed in theUnited States Supreme Court seeking a review of the Fourth Circuit's decision was denied on October 7, 2008.

An arbitration hearing on liability with respect to the alleged restitution policy and practice for the period beginning in late 1998 throughearly 2002 concluded in June, 2010. On October 11, 2010, the arbitrator issued a partial interim award for the first phase of the three-phasearbitration finding that, for the period from late 1998 to early 2002, LJS had a policy and practice of making impermissible deductionsfrom the salaries of its RGMs and ARGMs.

On September 15, 2011, the parties entered into a Memorandum of Understanding setting forth the terms upon which the parties hadagreed to settle this matter. On October 5, 2011, the arbitrator granted the parties' Joint Motion for Preliminary Approval of the Settlement.On December 12, 2011, the arbitrator granted final approval of the settlement. The payments associated with the settlement have been



made. As the settlement was largely consistent with our previous reserve position, the settlement did not significantly impact our resultsof operations in the year ended December 31, 2011.

89



On August 4, 2006, a putative class action lawsuit against Taco Bell Corp. styled Rajeev Chhibber vs. Taco Bell Corp. was filed in OrangeCounty Superior Court. On August 7, 2006, another putative class action lawsuit styled Marina Puchalski v. Taco Bell Corp. was filed inSan Diego County Superior Court. Both lawsuits were filed by a Taco Bell RGM purporting to represent all current and former RGMswho worked at corporate-owned restaurants in California since August 2002. The lawsuits allege violations of California's wage andhour laws involving unpaid overtime and meal period violations and seek unspecified amounts in damages and penalties. The cases wereconsolidated in San Diego County as of September 7, 2006.

On January 29, 2010, the court granted the plaintiffs' class certification motion with respect to the unpaid overtime claims of RGMs andMarket Training Managers but denied class certification on the meal period claims. The court has ruled that this case will be tried to thebench rather than a jury. Trial began on February 15, 2012.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. We have provided for a reasonable estimateof the cost of this lawsuit. However, in view of the inherent uncertainties of litigation, there can be no assurance that this lawsuit will notresult in losses in excess of those currently provided for in our Consolidated Financial Statements.

Taco Bell was named as a defendant in a number of putative class action suits filed in 2007, 2008, 2009 and 2010 alleging violationsof California labor laws including unpaid overtime, failure to pay wages on termination, failure to pay accrued vacation wages, failureto pay minimum wage, denial of meal and rest breaks, improper wage statements, unpaid business expenses, wrongful termination,discrimination, conversion and unfair or unlawful business practices in violation of California Business & Professions Code §17200.Plaintiffs also seek penalties for alleged violations of California's Labor Code under California's Private Attorneys General Act andstatutory “waiting time” penalties and allege violations of California's Unfair Business Practices Act. Plaintiffs seek to represent aCalifornia state-wide class of hourly employees.

On May 19, 2009 the court granted Taco Bell's motion to consolidate these matters, and the consolidated case is styled In Re Taco BellWage and Hour Actions. The In Re Taco Bell Wage and Hour Actions plaintiffs filed a consolidated complaint on June 29, 2009, andon March 30, 2010 the court approved the parties' stipulation to dismiss the Company from the action. Plaintiffs filed their motion forclass certification on the vacation and final pay claims on December 30, 2010, and the class certification hearing took place in June 2011.Taco Bell also filed, at the invitation of the court, a motion to stay the proceedings until the California Supreme Court rules on two casesconcerning meal and rest breaks. On August 22, 2011, the court granted Taco Bell's motion to stay the meal and rest break claims. OnSeptember 26, 2011, the court issued its order denying the certification of the remaining vacation and final pay claims. The plaintiffs havenot moved for class certification on the remaining claims in the consolidated complaint.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertaintiesof litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonablyestimated.

On September 28, 2009, a putative class action styled Marisela Rosales v. Taco Bell Corp. was filed in Orange County Superior Court.The plaintiff, a former Taco Bell crew member, alleges that Taco Bell failed to timely pay her final wages upon termination, and seeksrestitution and late payment penalties on behalf of herself and similarly situated employees. This case appears to be duplicative of theIn Re Taco Bell Wage and Hour Actions case described above. Taco Bell filed a motion to dismiss, stay or transfer the case to the samedistrict court as the In Re Taco Bell Wage and Hour Actions case. The state court granted Taco Bell's motion to stay the Rosales case onMay 28, 2010. After the denial of class certification in the In Re Taco Bell Wage and Hour Actions, the court granted the plaintiff leave toamend her lawsuit, which the plaintiff filed and served on January 4, 2012. Taco Bell filed its responsive pleading on February 8, 2012.


On October 2, 2009, a putative class action, styled Domonique Hines v. KFC U.S. Properties, Inc., was filed in California statecourt on behalf of all California hourly employees alleging various California Labor Code violations, including rest and meal breakviolations, overtime violations, wage statement violations and waiting time penalties. Plaintiff is a former non-managerial KFC restaurantemployee. KFC filed an answer on October 28, 2009, in which it denied plaintiff's claims and allegations. KFC removed the action tothe United States District Court for the Southern District of California on October 29, 2009. Plaintiff filed a motion for class certificationon May 20, 2010 and KFC filed a brief in opposition. On October 22, 2010, the District Court granted Plaintiff's motion to certify a classon the meal and rest break claims, but denied the motion to certify a class regarding alleged off-the-clock work. On November 1, 2010,KFC filed a motion requesting a stay of the case pending a decision from the

90



California Supreme Court regarding the applicable standard for employer provision of meal and rest breaks. Plaintiff filed an oppositionto that motion on November 19, 2010. On January 14, 2011, the District Court granted KFC's motion and stayed the entire action pendinga decision from the California Supreme Court. No trial date has been set.

KFC denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertaintiesof litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonablyestimated.

On December 17, 2002, Taco Bell was named as the defendant in a class action lawsuit filed in the United States District Court for theNorthern District of California styled Moeller, et al. v. Taco Bell Corp. On August 4, 2003, plaintiffs filed an amended complaint thatalleges, among other things, that Taco Bell has discriminated against the class of people who use wheelchairs or scooters for mobilityby failing to make its approximately 220 company-owned restaurants in California accessible to the class. Plaintiffs contend that queuerails and other architectural and structural elements of the Taco Bell restaurants relating to the path of travel and use of the facilities bypersons with mobility-related disabilities do not comply with the U.S. Americans with Disabilities Act (the “ADA”), the Unruh CivilRights Act (the “Unruh Act”), and the California Disabled Persons Act (the “CDPA”). Plaintiffs have requested: (a) an injunction fromthe District Court ordering Taco Bell to comply with the ADA and its implementing regulations; (b) that the District Court declare TacoBell in violation of the ADA, the Unruh Act, and the CDPA; and (c) monetary relief under the Unruh Act or CDPA. Plaintiffs, on behalfof the class, are seeking the minimum statutory damages per offense of either $4,000 under the Unruh Act or $1,000 under the CDPA foreach aggrieved member of the class. Plaintiffs contend that there may be in excess of 100,000 individuals in the class.

On February 23, 2004, the District Court granted plaintiffs' motion for class certification. The class includes claims for injunctive reliefand minimum statutory damages.

On May 17, 2007, a hearing was held on plaintiffs' Motion for Partial Summary Judgment seeking judicial declaration that Taco Bell wasin violation of accessibility laws as to three specific issues: indoor seating, queue rails and door opening force. On August 8, 2007, thecourt granted plaintiffs' motion in part with regard to dining room seating. In addition, the court granted plaintiffs' motion in part withregard to door opening force at some restaurants (but not all) and denied the motion with regard to queue lines.

On December 16, 2009, the court denied Taco Bell's motion for summary judgment on the ADA claims and ordered plaintiff to file adefinitive list of remaining issues and to select one restaurant to be the subject of a trial. The exemplar trial for that restaurant began onJune 6, 2011. The trial was bifurcated and the first stage addressed whether violations existed at the restaurant. Twelve alleged violationsof the ADA and state law were tried. The trial ended on June 16, 2011. On October 5, 2011, the court issued its trial decision. Thecourt found liability for the twelve items, finding that they were once out of compliance with applicable state and/or federal accessibilitystandards. The court also found that classwide injunctive relief is warranted. The court declined to order injunctive relief at this time,however, citing the pendency of Taco Bell's motions to decertify both the injunctive and damages class. In a separate order, the courtvacated the December 12, 2011 date previously set for an exemplar trial for damages on the single restaurant.

On June 20, 2011, the United States Supreme Court issued its ruling in Wal-Mart Stores, Inc. v. Dukes. The Supreme Court held thatthe class in that case was improperly certified. The same legal theory was used to certify the class in the Moeller case, and Taco Bellfiled a motion to decertify the class on August 3, 2011. During the exemplar trial, the court observed that the restaurant had been infull compliance with all laws since March, 2010, and Taco Bell argues in its decertification motion that, in light of the decision in theDukes case, no damages class can be certified and that injunctive relief is not appropriate, regardless of class status. On October 19,2011, plaintiffs filed a motion to amend the certified class to include a damages class. Discovery regarding the putative damages class isproceeding, after which the parties will complete briefing on Taco Bell's motion to decertify and plaintiffs' motion to amend the class.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. Taco Bell has taken steps to address potentialarchitectural and structural compliance issues at the restaurants in accordance with applicable state and federal disability access laws.The costs associated with addressing these issues have not significantly impacted our results of operations. It is not possible at this timeto reasonably estimate the probability or amount of liability for monetary damages on a class wide basis to Taco Bell.

On July 9, 2009, a putative class action styled Mark Smith v. Pizza Hut, Inc. was filed in the United States District Court for the Districtof Colorado. The complaint alleged that Pizza Hut did not properly reimburse its delivery drivers for various automobile costs, uniformscosts, and other job-related expenses and seeks to represent a class of delivery drivers nationwide under the FLSA and Colorado statelaw. On January 4, 2010, plaintiffs filed a motion for conditional certification of a nationwide class of current and former Pizza Hut, Inc.delivery drivers. However, on March 11, 2010, the court granted Pizza Hut's pending motion to dismiss for failure to state a claim, withleave to amend. On March 31, 2010, plaintiffs filed an amended complaint, which dropped the

91



uniform claims but, in addition to the federal FLSA claims, asserts state-law class action claims under the laws of sixteen different states.Pizza Hut filed a motion to dismiss the amended complaint, and plaintiffs sought leave to amend their complaint a second time. OnAugust 9, 2010, the court granted plaintiffs' motion to amend. Pizza Hut filed another motion to dismiss the Second Amended Complaint.On July 15, 2011, the Court granted Pizza Hut's motion with respect to plaintiffs' state law claims, but allowed the FLSA claims to goforward. Plaintiffs filed their Motion for Conditional Certification on August 31, 2011 to which Pizza Hut filed its opposition on October5, 2011. A decision on plaintiffs' Motion for Conditional Certification is expected during 2012.

Pizza Hut denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertaintiesof litigation, the outcome of these cases cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonablyestimated.

On August 6, 2010, a putative class action styled Jacquelyn Whittington v. Yum Brands, Inc., Taco Bell of America, Inc. and Taco BellCorp. was filed in the United States District Court for the District of Colorado. The plaintiff seeks to represent a nationwide class, with theexception of California, of salaried assistant managers who were allegedly misclassified and did not receive compensation for all hoursworked and did not receive overtime pay after 40 hours worked in a week. The plaintiff also purports to represent a separate class ofColorado assistant managers under Colorado state law, which provides for daily overtime after 12 hours worked in a day. The Companyhas been dismissed from the case without prejudice. Taco Bell filed its answer on September 20, 2010, and the parties commenced classdiscovery, which is currently on-going. Taco Bell moved to compel arbitration of certain employees in the Colorado class. The courtdenied the motion as premature because no class has yet been certified. On September 16, 2011, the plaintiffs filed their motion forconditional certification under the FLSA. The plaintiffs did not move for certification of a separate class of Colorado assistant managersunder Colorado state law. Taco Bell opposed the motion. The court heard the motion on January 10, 2012, granted conditional certificationand ordered the notice of the opt-in class be sent to the putative class members. Taco Bell expects the notices to be sent by the end ofFebruary 2012. Putative class members will have 90 days in which to elect to participate in the lawsuit. After further discovery, Taco Bellplans to seek decertification of the class.


We are engaged in various other legal proceedings and have certain unresolved claims pending, the ultimate liability for which, if any,cannot be determined at this time. However, based upon consultation with legal counsel, we are of the opinion that such proceedingsand claims are not expected to have a material adverse effect, individually or in the aggregate, on our consolidated financial condition orresults of operations.

92



Note 20 – Selected Quarterly Financial Data (Unaudited)

2011First

QuarterSecondQuarter

ThirdQuarter

FourthQuarter Total

Revenues:Company sales $ 2,051 $ 2,431 $ 2,854 $ 3,557 $ 10,893Franchise and license fees and income 374 385 420 554 1,733Total revenues 2,425 2,816 3,274 4,111 12,626

Restaurant profit 360 386 494 513 1,753Operating Profit(a) 401 419 488 507 1,815Net Income – YUM! Brands, Inc. 264 316 383 356 1,319Basic earnings per common share 0.56 0.67 0.82 0.77 2.81Diluted earnings per common share 0.54 0.65 0.80 0.75 2.74Dividends declared per common share — 0.50 — 0.57 1.07

2010First


ThirdQuarter

FourthQuarter Total

Revenues:Company sales $ 1,996 $ 2,220 $ 2,496 $ 3,071 $ 9,783Franchise and license fees and income 349 354 366 491 1,560Total revenues 2,345 2,574 2,862 3,562 11,343

Restaurant profit 340 366 479 478 1,663Operating Profit(b) 364 421 544 440 1,769Net Income – YUM! Brands, Inc. 241 286 357 274 1,158Basic earnings per common share 0.51 0.61 0.76 0.58 2.44Diluted earnings per common share 0.50 0.59 0.74 0.56 2.38Dividends declared per common share 0.21 0.21 — 0.50 0.92

(a) Includes net losses of $65 million primarily related to the LJS and A&W divestitures, $88 million primarily related torefranchising international markets and $28 million primarily related to the U.S. business transformation measures and U.S.refranchising in the first, third and fourth quarters of 2011, respectively. See Note 4. The fourth quarter of 2011 also includesthe $25 million impact of the 53rd week. See Note 2.

(b) Includes net losses of $66 million and $19 million in the first and fourth quarters of 2010, respectively, related primarily to theU.S. business transformation measures and refranchising international markets. See Note 4.

Note 21 – Subsequent Event

On February 1, 2012, subsequent to the end of the fourth quarter, we paid $584 million to acquire an additional 66% interest in LittleSheep, which brought our total ownership to approximately 93% of the business. Upon acquisition, we have voting control of Little Sheepand thus will begin to consolidate its results.

93



Management’s Responsibility for Financial Statements

To Our Shareholders:

We are responsible for the preparation, integrity and fair presentation of the Consolidated Financial Statements, related notes and otherinformation included in this annual report. The financial statements were prepared in accordance with accounting principles generallyaccepted in the United States of America and include certain amounts based upon our estimates and assumptions, as required. Otherfinancial information presented in the annual report is derived from the financial statements.

We maintain a system of internal control over financial reporting, designed to provide reasonable assurance as to the reliability of thefinancial statements, as well as to safeguard assets from unauthorized use or disposition. The system is supported by formal policiesand procedures, including an active Code of Conduct program intended to ensure employees adhere to the highest standards of personaland professional integrity. We have conducted an evaluation of the effectiveness of our internal control over financial reporting basedon the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission. Based on our evaluation, we concluded that our internal control over financial reporting was effective as of December 31,2011. Our internal audit function monitors and reports on the adequacy of and compliance with the internal control system, andappropriate actions are taken to address significant control deficiencies and other opportunities for improving the system as they areidentified.

The Consolidated Financial Statements have been audited and reported on by our independent auditors, KPMG LLP, who were givenfree access to all financial records and related data, including minutes of the meetings of the Board of Directors and Committees ofthe Board. We believe that management representations made to the independent auditors were valid and appropriate. Additionally, theeffectiveness of our internal control over financial reporting has been audited and reported on by KPMG LLP.

The Audit Committee of the Board of Directors, which is composed solely of outside directors, provides oversight to our financialreporting process and our controls to safeguard assets through periodic meetings with our independent auditors, internal auditors andmanagement. Both our independent auditors and internal auditors have free access to the Audit Committee.

Although no cost-effective internal control system will preclude all errors and irregularities, we believe our controls as of December 31,2011 provide reasonable assurance that our assets are reasonably safeguarded.

Richard T. CarucciChief Financial Officer

94



Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on theevaluation, performed under the supervision and with the participation of the Company’s management, including the Chairman, ChiefExecutive Officer and President (the “CEO”) and the Chief Financial Officer (the “CFO”), the Company’s management, including theCEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered bythis report.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is definedin Rules 13a-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management,including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internalcontrol over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – IntegratedFramework, our management concluded that our internal control over financial reporting was effective as of December 31, 2011.

KPMG LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this AnnualReport on Form 10-K and the effectiveness of our internal control over financial reporting and has issued their report, included herein.

Changes in Internal Control

There were no changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected,or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended December 31, 2011.

Item 9B. Other Information.

None.

95



PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information regarding Section 16(a) compliance, the Audit Committee and the Audit Committee financial expert, the Company’scode of ethics and background of the directors appearing under the captions “Stock Ownership Information,” “Governance of theCompany,” “Executive Compensation” and “Item 1: Election of Directors and Director biographies” is incorporated by reference fromthe Company’s definitive proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days afterDecember 31, 2011.

Information regarding executive officers of the Company is included in Part I.

Item 11. Executive Compensation.

Information regarding executive and director compensation and the Compensation Committee appearing under the captions “Governanceof the Company” and “Executive Compensation” is incorporated by reference from the Company’s definitive proxy statement which willbe filed with the Securities and Exchange Commission no later than 120 days after December 31, 2011.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters.

Information regarding equity compensation plans and security ownership of certain beneficial owners and management appearing underthe captions “Executive Compensation” and “Stock Ownership Information” is incorporated by reference from the Company’s definitiveproxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2011.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information regarding certain relationships and related transactions and information regarding director independence appearing under thecaption “Governance of the Company” is incorporated by reference from the Company’s definitive proxy statement which will be filedwith the Securities and Exchange Commission no later than 120 days after December 31, 2011.

Item 14. Principal Accountant Fees and Services.

Information regarding principal accountant fees and services and audit committee pre-approval policies and procedures appearing underthe caption “Item 2: Ratification of Independent Auditors” is incorporated by reference from the Company’s definitive proxy statementwhich will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2011.

96



PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) (1) Financial Statements: Consolidated Financial Statements filed as part of this report are listed under Part II, Item8 of this Form 10-K.

(2) Financial Statement Schedules: No schedules are required because either the required information is not presentor not present in amounts sufficient to require submission of the schedule, or because the information required isincluded in the Consolidated Financial Statements thereto filed as a part of this Form 10-K.

(3) Exhibits: The exhibits listed in the accompanying Index to Exhibits are filed as part of this Form 10-K. TheIndex to Exhibits specifically identifies each management contract or compensatory plan required to be filed asan exhibit to this Form 10-K.

97



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Kannual report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 20, 2012

YUM! BRANDS, INC.

By: /s/ David C. Novak

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following personson behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ David C. Novak Chairman of the Board, February 20, 2012David C. Novak Chief Executive Officer and President

(principal executive officer)

/s/ Richard T. Carucci Chief Financial Officer February 20, 2012Richard T. Carucci (principal accounting officer)

/s/ David E. Russell Vice President and Corporate Controller February 20, 2012David E. Russell (principal accounting officer)

/s/ David W. Dorman Director February 20, 2012David W. Dorman

/s/ Massimo Ferragamo Director February 20, 2012Massimo Ferragamo

/s/ J. David Grissom Director February 20, 2012J. David Grissom

/s/ Bonnie G. Hill Director February 20, 2012Bonnie G. Hill



98



/s/ Robert Holland, Jr. Director February 20, 2012Robert Holland, Jr.

/s/ Kenneth G. Langone Director February 20, 2012Kenneth G. Langone

/s/ Jonathan S. Linen Director February 20, 2012Jonathan S. Linen

/s/ Thomas C. Nelson Director February 20, 2012Thomas C. Nelson

/s/ Thomas M. Ryan Director February 20, 2012Thomas M. Ryan

/s/ Jing-Shyh S. Su Vice-Chairman of the Board February 20, 2012Jing-Shyh S. Su

/s/ Robert D. Walter Director February 20, 2012Robert D. Walter

99



YUM! Brands, Inc.Exhibit Index

(Item 15)

ExhibitNumber Description of Exhibits

3.1 Restated Articles of Incorporation of YUM, effective May 26, 2011, which is incorporated herein byreference from Exhibit 3.1 to YUM's Report on Form 8-K filed on May 31, 2011.

3.2 Amended and restated Bylaws of YUM, effective May 26, 2011, which are incorporated herein byreference from Exhibit 3.2 to YUM's Report on Form 8-K filed on May 31, 2011.

4.1 Indenture, dated as of May 1, 1998, between YUM and J.P. Morgan Chase Bank, National Association,successor in interest to The First National Bank of Chicago, which is incorporated herein by referencefrom Exhibit 4.1 to YUM's Report on Form 8-K filed on May 13, 1998.(i) 7.70% Senior Notes due July 1, 2012 issued under the foregoing May 1, 1998 indenture,

which notes are incorporated by reference from Exhibit 4.1 to YUM's Report on Form 8-Kfiled on July 2, 2002.

(ii) 6.25% Senior Notes due April 15, 2016 issued under the foregoing May 1, 1998indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Reporton Form 8-K filed on April 17, 2006.

(iii) 6.25% Senior Notes due March 15, 2018 issued under the foregoing May 1, 1998indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Report onForm 8-K filed on October 22, 2007.

(iv) 6.875% Senior Notes due November 15, 2037 issued under the foregoing May 1, 1998indenture, which notes are incorporated by reference from Exhibit 4.3 to YUM's Report onForm 8-K filed on October 22, 2007.

(v) 4.25% Senior Notes due September 15, 2015 issued under the foregoing May 1, 1998indenture, which notes are incorporated by reference from Exhibit 4.1 to YUM's Report onForm 8-K filed on August 25, 2009.

(vi) 5.30% Senior Notes due September 15, 2019 issued under the foregoing May 1, 1998indenture, which notes are incorporated by reference from Exhibit 4.1 to YUM's Report onForm 8-K filed on August 25, 2009.

(vii) 3.875% Senior Notes due November 1, 2020 issued under the foregoing May 1, 1998indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Reporton Form 8-K filed on August 31, 2010.

(viii) 3.750% Senior Notes due November 1, 2021 issued under the foregoing May 1, 1998indenture, which notes are incorporated by reference from Exhibit 4.2 to YUM's Reporton Form 8-K filed August 29, 2011.

10.1 + Master Distribution Agreement between Unified Foodservice Purchasing Co-op, LLC, for and on behalfof itself as well as the Participants, as defined therein (including certain subsidiaries of Yum! Brands,



Inc.) and McLane Foodservice, Inc., effective as of January 1, 2011 and Participant Distribution JoinderAgreement between Unified Foodservice Purchasing Co-op, LLC, McLane Foodservice, Inc., and certainsubsidiaries of Yum! Brands, Inc., which are incorporated herein by reference from Exhibit 10.1 to YUM'sQuarterly Report on Form 10-Q for the quarter ended September 4, 2010.

100



10.2 Amended and Restated Credit Agreement, dated November 29, 2007 among YUM, the lenders partythereto, JP Morgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities Inc. and CitigroupGlobal Markets Inc., as Lead Arrangers and Bookrunners and Citibank N.A., as Syndication Agent, whichis incorporated herein by reference from Exhibit 10.6 to YUM's Annual Report on Form 10-K for thefiscal year ended December 29, 2007.

10.3† YUM Director Deferred Compensation Plan, as effective October 7, 1997, which is incorporated herein byreference from Exhibit 10.7 to YUM's Annual Report on Form 10-K for the fiscal year ended December27, 1997.

10.3.1† YUM Director Deferred Compensation Plan, Plan Document for the 409A Program, as effective January1, 2005, and as Amended through November 14, 2008, which is incorporated by reference from Exhibit10.7.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009.

10.4† YUM 1997 Long Term Incentive Plan, as effective October 7, 1997, which is incorporated herein byreference from Exhibit 10.8 to YUM's Annual Report on Form 10-K for the fiscal year ended December27, 1997.

10.5† YUM Executive Incentive Compensation Plan, as effective May 20, 2004, and as Amended through theSecond Amendment, as effective May 21, 2009, which is incorporated herein by reference from Exhibit Aof YUM's Definitive Proxy Statement on Form DEF 14A for the Annual Meeting of Shareholders held onMay 21, 2009.

10.6† YUM Executive Income Deferral Program, as effective October 7, 1997, and as amended through May16, 2002, which is incorporated herein by reference from Exhibit 10.10 to YUM's Annual Report on Form10-K for the fiscal year ended December 31, 2005.

10.6.1† YUM! Brands Executive Income Deferral Program, Plan Document for the 409A Program, as effectiveJanuary 1, 2005, and as Amended through June 30, 2009, which is incorporated by reference from Exhibit10.10.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009.

10.7† YUM! Brands Pension Equalization Plan, Plan Document for the Pre-409A Program, as effectiveJanuary 1, 2005, and as Amended through December 31, 2010, which is incorporated by reference fromExhibit 10.7 to Yum's Quarterly Report on Form 10-Q for the quarter ended March 19, 2011.

10.7.1† YUM! Brands, Inc. Pension Equalization Plan, Plan Document for the 409A Program, as effective January1, 2005, and as Amended through December 30, 2008, which is incorporated by reference from Exhibit10.13.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009.

10.8† Form of Directors' Indemnification Agreement, which is incorporated herein by reference from Exhibit10.17 to YUM's Annual Report on Form 10-K for the fiscal year ended December 27, 1997.

10.9† Amended and restated form of Severance Agreement (in the event of a change in control), which isincorporated herein by reference from Exhibit 10.17 to YUM's Annual Report on Form 10-K for the fiscalyear ended December 30, 2000.

10.9.1† YUM! Brands, Inc. 409A Addendum to Amended and restated form of Severance Agreement, as effectiveDecember 31, 2008, which is incorporated by reference from Exhibit 10.17.1 to YUM's Quarterly Reporton Form 10-Q for the quarter ended June 13, 2009.



10.10† YUM Long Term Incentive Plan, as Amended through the Fourth Amendment, as effective November 21,2008, which is incorporated by reference from Exhibit 10.18 to YUM's Quarterly Report on Form 10-Qfor the quarter ended June 13, 2009.

101



10.11 Second Amended and Restated YUM Purchasing Co-op Agreement, dated as of January 1, 2012, betweenYUM and the Unified FoodService Purchasing Co-op, LLC, as filed herewith.

10.12† YUM Restaurant General Manager Stock Option Plan, as effective April 1, 1999, and as amended throughJune 23, 2003, which is incorporated herein by reference from Exhibit 10.22 to YUM's Annual Report onForm 10-K for the fiscal year ended December 31, 2005.

10.13† YUM SharePower Plan, as effective October 7, 1997, and as amended through June 23, 2003, which isincorporated herein by reference from Exhibit 10.23 to YUM's Annual Report on Form 10-K for the fiscalyear ended December 31, 2005.

10.14† Form of YUM Director Stock Option Award Agreement, which is incorporated herein by reference fromExhibit 10.25 to YUM's Quarterly Report on Form 10-Q for the quarter ended September 4, 2004.

10.15† Form of YUM 1999 Long Term Incentive Plan Award Agreement, which is incorporated herein byreference from Exhibit 10.26 to YUM's Quarterly Report on Form 10-Q for the quarter ended September4, 2004.

10.16† YUM! Brands, Inc. International Retirement Plan, as in effect January 1, 2005, which is incorporatedherein by reference from Exhibit 10.27 to YUM's Annual Report on Form 10-K for the fiscal year endedDecember 25, 2004.

10.17† Letter of Understanding, dated July 13, 2004, and as amended on May 18, 2011, by and between theCompany and Samuel Su, which is incorporated herein by reference from Exhibit 10.28 to YUM's AnnualReport on Form 10-K for the fiscal year ended December 25, 2004, and from Item 5.02 of Form 8-K onMay 24, 2011.

10.18† Form of 1999 Long Term Incentive Plan Award Agreement (Stock Appreciation Rights) which isincorporated by reference from Exhibit 99.1 to YUM's Report on Form 8-K as filed on January 30, 2006.

10.19 Amended and Restated Credit Agreement, dated November 29, 2007, among YUM, the lenders partythereto, Citigroup Global Markets Ltd. and J.P. Morgan Securities Inc., as Lead Arrangers andBookrunners, and Citigroup International Plc and Citibank, N.A., Canadian Branch, as Facility Agents,which is incorporated herein by reference from Exhibit 10.30 to YUM's Annual Report on Form 10-K forthe fiscal year ended December 29, 2007.

10.20† YUM! Brands Leadership Retirement Plan, as in effect January 1, 2005, which is incorporated herein byreference from Exhibit 10.32 to YUM's Quarterly Report on Form 10-Q for the quarter ended March 24,2007.

10.20.1† YUM! Brands Leadership Retirement Plan, Plan Document for the 409A Program, as effective January 1,2005, and as Amended through December, 2009, which is incorporated by reference from Exhibit 10.21.1to YUM's Annual Report on Form 10-K for the fiscal year ended December 26, 2009.

10.21† 1999 Long Term Incentive Plan Award (Restricted Stock Unit Agreement) by and between the Companyand David C. Novak, dated as of January 24, 2008, which is incorporated herein by reference from Exhibit10.33 to YUM's Annual Report on Form 10-K for the fiscal year ended December 29, 2007.



10.22† YUM! Performance Share Plan, as effective January 1, 2009, which is incorporated by reference fromExhibit 10.24 to YUM's Annual Report on Form 10-K for the fiscal year ended December 26, 2009.

102



10.23† YUM! Brands Third Country National Retirement Plan, as effective January 1, 2009, which isincorporated by reference from Exhibit 10.25 to YUM's Annual Report on Form 10-K for the fiscal yearended December 26, 2009.

10.24† 2010 YUM! Brands Supplemental Long Term Disability Coverage Summary, as effective January 1, 2010,which is incorporated by reference from Exhibit 10.26 to YUM's Annual Report on Form 10-K for thefiscal year ended December 26, 2009.

10.25† 1999 Long Term Incentive Plan Award (Restricted Stock Unit Agreement) by and between the Companyand Jing-Shyh S. Su, dated as of May 20, 2010, which is incorporated by reference from Exhibit 10.27 toYUM's Annual Report on Form 10-K for the fiscal year ended December 25, 2010.

12.1 Computation of ratio of earnings to fixed charges.

21.1 Active Subsidiaries of YUM.

23.1 Consent of KPMG LLP.

31.1 Certification of the Chairman, Chief Executive Officer and President pursuant to Rule 13a-14(a) ofSecurities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the Chairman, Chief Executive Officer and President pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document



+ Confidential treatment has been granted for certain portions which are omitted in the copy of the exhibitelectronically filed with the SEC. The omitted information has been filed separately with the SEC pursuant to ourapplication for confidential treatment.

† Indicates a management contract or compensatory plan.

103



SECOND AMENDED AND RESTATED YUM! PURCHASING CO-OP AGREEMENT

This is a Second Amended and Restated YUM! Purchasing Co-op Agreement (this "Agreement") between YUM!Brands, Inc. (together with its affiliates, "YUM") formerly named Tricon Global Restaurants, Inc., a North Carolinacorporation, and the Unified Foodservice Purchasing Co-op, LLC ("UFPC"), a Kentucky limited liability company, effectiveas of January 1, 2012.

Recitals

A. This Agreement amends and restates the Tricon Purchasing Coop Agreement dated March 1, 1999, as previouslyamended on January 25, 2001 and as further amended on March 16, 2005.

B. YUM is engaged in the franchising and operation of quick service restaurants and other food outlets (collectively"Outlets") in the KFC, Pizza Hut and Taco Bell concepts (each a "Concept"). UFPC was formed on March 1, 1999,by the KFC National Purchasing Co-op (the "KFC Co-op"), the Taco Bell National Purchasing Co-op, Inc. (the"Taco Bell Co-op") and the Pizza Hut National Purchasing Co-op, Inc. (the "Pizza Hut Co-op") (the "Concept Co-ops") in consultation with YUM, as a cooperative venture to administer purchasing programs for the Outlets operatedby YUM and other members of Concept Co-ops ("Member Outlets"). The established programs of the KFC Co-opfor KFC franchisees and Taco Bell franchisees, and the pilot purchasing program of the KFC Co-op for Pizza Hutfranchisees, were combined through UFPC and the Concept Co-ops with the purchasing programs of YUM's SupplyChain Management ("SCM"). YUM has the right to designate two members of UFPC's Board of Directors. YUM isa member of each of the KFC, Pizza Hut and Taco Bell Concept Co-ops.

C. This is the Second Amended and Restated YUM! Purchasing Co-op Agreement mentioned in Section 4.1 of theSecond Amended and Restated UFPC Operating Agreement of even date herewith (the "Operating Agreement").

D. YUM has designated, and continues to designate, certain vendors, processors and manufacturers as approvedsuppliers ("Approved Suppliers") for food, packaging and supplies and related services ("Goods") and equipmentand related services ("Equipment") used in the system of Outlets (the "System") pursuant to agreements betweenYUM and Approved Suppliers ("Supplier Agreements"). YUM has designated, and continues to designate, certainwholesalers and distributors ("Approved Distributors") for distribution of Goods and Equipment to the Systempursuant to agreements between YUM and Approved Distributors ("Distributor Agreements"). In addition, YUM hasentered into an amended agreement with McLane Foodservice, Inc. ("McLane") (the "McLane Agreement") grantingMcLane certain distribution rights with respect to certain Outlets.

E. YUM and UFPC entered into a separate agreement dated as of March 1, 1999, concerning the transfer by YUMto UFPC and the assumption by UFPC of certain SCM purchase contracts and arrangements (the "SCM TransferAgreement").

F. The core mission (the "Mission") of UFPC is (a) to assure that operators of Outlets ("Operators") receive the benefitof continuously available Goods and Equipment in adequate quantities at the lowest possible sustainable Outlet-delivered prices, and (b) to coordinate with YUM in YUM's ongoing development and innovation of Goods andEquipment in support and promotion of each of the Concepts.

G. Except as provided in Section 5 hereof with respect to the approval of suppliers and distributors, nothing in thisAgreement is intended to affect, limit, diminish, or otherwise modify any of the rights or obligations of YUM underany franchise or license agreement entered into with respect to any Outlet ("Franchise Agreement") or under theMcLane Agreement.



1



NOW THEREFORE, for good and valuable consideration, YUM and UFPC agree as follows:

l. Designation. Upon the terms and conditions set forth in this Agreement and the Operating Agreement, YUMhereby constitutes, appoints and designates UFPC, on an exclusive basis to administer purchasing programson behalf of the Concept Co-ops and otherwise (the "Purchasing Programs"), as the purchasing organizationand purchasing agent for Goods and Equipment (including Goods and Equipment with respect to whichYUM has not designated one or more Approved Suppliers) for all Outlets located in the United States(the "Area"). During the term of this Agreement, YUM shall not appoint or authorize any person or entity,other than a Concept Co-op, to perform the Purchasing Programs or to act as a purchasing organizationor purchasing agent for the System in the Area without UFPC's express prior written consent. YUMshall promptly notify all existing and future Approved Suppliers and Approved Distributors and Systemfranchisees of UFPC's designation to perform the Purchasing Programs as the purchasing organizationand purchasing agent for the YUM System and Outlets in the Area. YUM also authorizes UFPC on anon-exclusive basis to purchase Goods and Equipment, and make purchase arrangements for Goods andEquipment, sourced in the Area for use in the entire System including Outlets outside of the Area. YUMmay purchase Goods and Equipment sourced in the Area for use in the System outside the Area directly fromUFPC or indirectly under contracts negotiated by UFPC provided YUM pays UFPC fees or margins on eachpurchase of Goods and Equipment not to exceed those charged by UFPC in similar transactions involvingMember Outlets or distributors serving Member Outlets. The Purchasing Programs shall include all Goodsand Equipment for all Outlets in the Area, except for items and related services (such as energy aggregationwhere YUM may be better positioned to make supply arrangements, or items and services where UFPC addsno value or service such as locally sourced office supplies and equipment) which YUM and UFPC or theapplicable Concept Co-op or Co-ops agree are not appropriate to include in the Purchasing Programs. ThePurchasing Programs include: (a) the negotiation of the price and other terms of purchasing arrangementsfor Goods and Equipment both when UFPC takes title to Goods and Equipment and when it does not; (b) thesale of Goods and Equipment to Operators and Approved Distributors; (c) logistics and freight; (d) assistancein the negotiation and monitoring of distribution arrangements; and (e) other supply chain managementfunctions including cooperation with YUM's Brand Management function. Nothing in this Agreement ismeant to take away or adversely affect any rights of a franchisee under a Franchise Agreement to purchaseGoods and Equipment directly from any Approved Supplier or Approved Distributor.

2. Purchase Commitment. During the term of this Agreement, YUM shall purchase virtually all Goods andEquipment for use in YUM operated Outlets in the Area through the Purchasing Programs of UFPC andthe Concept Co-ops. "Virtually all" with respect to Goods and Equipment means all Goods and Equipmentexcept Goods and Equipment:

(a) Where UFPC, or with respect to Outlets of a particular Concept, a Concept Co-op, agrees in advancein writing that YUM need not purchase the particular item or category of Goods or Equipmentthrough the Purchasing Programs of UFPC;

(b) Where YUM determines in good faith, after written notice to UFPC (or if prior notice is impractical,with notice given as soon as possible), with respect to a specific item or category of Goods orEquipment for specific Outlets that: (i) UFPC is unable to meet YUM's required volume of supplyfor the particular Goods or Equipment; or (ii) UFPC is unable to meet previously established qualitystandards with respect to particular Goods or Equipment;

(c) Where YUM determines in good faith, after written notice to UFPC (or if prior notice is impracticalwith notice given as soon as possible), that UFPC's purchasing policies or procedures with respectto the particular item or category of Goods or Equipment present a material business risk to YUM,which YUM is unwilling to assume, because of UFPC's volume, hedging or similar commitments,arrangements or policies;



2



(d) Where YUM has a specific purchase commitment (such as commitments with respect to fountainbeverages, all of which are specifically set forth in detail on Schedule 1 to this Agreement) whichYUM is unable as a practical matter to assign to UFPC or which is inappropriate for UFPC toassume. Goods and Equipment purchased by YUM under commitments set forth on Schedule 1shall not be deemed to be Goods and Equipment for purposes of this Agreement;

(e) Where legal counsel to YUM has advised YUM that its commitments or the performance of its otherduties under this paragraph could reasonably be expected in a material way to violate or breachany applicable material law, ordinance, rule or regulation of any governmental body or any materialjudgment, decree, writ, injunction, order or aware of any court, governmental authority to arbitrativepanel; or

(f) Upon the proper termination of this Agreement.

3. Operating Agreement. YUM will abide by the terms of the Operating Agreement applicable to it. YUMacknowledges the Code of Business Conduct attached to the Operating Agreement as Annex B.

4. Concept Co-ops. YUM shall become and remain a stockholder member of each of the Concept Co-opsin good standing with respect to all YUM operated Outlets in the Area through the purchase by YUM ofmembership in accordance with the requirements and policies of each Concept Co-op. YUM shall abideby the terms of the Certificate of Incorporation and Bylaws of each Concept Co-op as in effect fromtime to time. YUM acknowledges that basic decisions about each restaurant concept's purchasing programoperations may in the Concept Co-op's discretion be made by each Concept Co-op, including resolution ofsuch issues as the Concept Co-op's guidelines to UFPC for when to take title and when not to take title toGoods and Equipment, and as to the centralization or decentralization and geographic location of Conceptpurchasing and program coordination functions.

5. Approval Matters.

(a) As provided in the Franchise Agreements, YUM shall have the exclusive right and obligationwith respect to the purchase and distribution of Goods and Equipment for the System includingwithout limitation to: (i) designate and terminate Approved Suppliers and Approved Distributors;(ii) designate approved Goods and Equipment; and (iii) develop, designate, modify and updatespecifications (including supplier product warranties) for Goods and Equipment.

(b) However, YUM shall maintain a supplier approval and a distributor approval process which: (i)has appropriate and significant franchisee, UFPC and Concept Co-op involvement; (ii) has specificpublished procedures, anticipated timetables and provisions for progress reports; (iii) provides thatfranchisees, UFPC and the Concept Co-ops may submit suppliers and distributors for approval; and(iv) reflects a philosophical commitment to the need in most circumstances for competition amongApproved Suppliers and Approved Distributors for the business of Outlets whenever competitionwill benefit the System or a Concept.

3



(c) Subject to: (i) YUM's reasonable policies with respect to trade secrets and with respect toconfidentiality undertakings by or to Approved Suppliers and potential suppliers with respectto proprietary information of YUM, an Approved Supplier or a potential supplier; and (ii)confidentiality arrangements with Approved Suppliers binding upon YUM on the date hereof, YUMshall make available to Approved Suppliers and potential suppliers specifications for Goods andEquipment in sufficient detail to encourage suppliers to apply for approval without the need to re-engineer Goods and Equipment.

(d) All Supplier Agreements and Distributor Agreements entered into after the date hereof shall note thedesignation by YUM of UFPC to conduct the Purchasing Programs.

6. Sheltered Income. Neither YUM nor UFPC shall, directly or indirectly, receive or benefit from (nor shalleither authorize any Approved Supplier, Approved Distributor or Concept Co-op, directly or indirectly, toreceive or benefit from) any "Sheltered Income" in connection with Goods or Equipment purchased or usedby Outlets in the Area, except for:

(a) Marketing or promotional allowances: (i)(A) provided outside the ordinary course which areapproved by UFPC and any applicable Concept Co-op or Co-ops, or (B) provided in the ordinarycourse; and (ii) which are distributed or administered for the benefit of Operators pro rata based onthe volume of the Operators' purchases;

(b) Discounts, rebates or allowances which directly lower Member Outlet delivered prices pro rataamong Operators based on the volume of the Operators' purchases;

(c) Higher prices for Goods or Equipment permitted or charged by Approved Suppliers to amortizeSupplier expenses related to research and development of Goods and Equipment if suchamortization of research and development expenses is incurred after YUM receives the advanceadvice and written consent (with such consent not to be withheld if the parties hereto determine ingood faith that the expenses to be incurred are both reasonable and in the best interests of the Systemof any Concept Co-op) of UFPC or the applicable Concept Co-op or Co-ops;

(d) Reasonable fees, in no event exceeding YUM's applicable direct expense, and not necessarilycompletely reimbursing YUM's direct expense in connection with the applicable activity, charged byYUM, in accordance with published schedules adopted with the advance advice and written consent(with such consent not to be withheld if the parties hereto determine in good faith that the expensesto be incurred are both reasonable and in the best interests of the System or any Concept Co-op)of UFPC and the applicable Concept Co-op or Co-ops to potential suppliers and distributors andto Approved Suppliers and Approved Distributors, in connection with the YUM supplier approvaland distributor approval processes, or in connection with YUM administered quality inspection andassurance programs;

(e) Sheltered Income specifically, completely and timely disclosed to UFPC not less than quarterlywhich YUM has permitted McLane to retain under the McLane Agreement with respect to Goodsand Equipment purchased or distributed by McLane for YUM operated Outlets;

(f) Reasonable and customary gifts and entertainment permissible under UFPC's Code of BusinessConduct as in effect from time to time under the Operating Agreement; or

(g) Sheltered Income expressly authorized by both YUM and UFPC or the applicable Concept Co-opor Co-ops such as higher prices permitted to amortize the cost of excess inventory or graphics andother product changes.



4



As used in this Agreement, "Sheltered Income" means so called earned income, rebates, kick-backs, volumediscounts, tier pricing, purchase commitment discounts, sales and service allowances, marketing allowances,advertising allowances, promotional allowances, label allowances, back-door income, application fees,inspection fees, quality assurance fees, etc., and includes, among other items: (a) fees charged suppliersand distributors in the supplier and distributor approval process; (b) fees charged suppliers and distributorsfor quality inspections and "hot line" inquiries and complaints; (c) license or trademark fees or rebatescharged or expected as a condition of supplier or distributor approval or use, typically paid as a percentage ofSystem wide volume; (d) higher prices permitted suppliers to amortize research and development expensesundertaken by suppliers at the request of YUM or otherwise; (e) higher prices permitted suppliers to amortizethe cost of excess inventory; (f) higher prices permitted suppliers to amortize the cost of graphics and otherproduct changes; (g) special or atypical payment terms; (h) payments and allowances to distributors fromsuppliers based on distributor volume which are not reflected as a reduction in distributor cost or prices; and(i) special favors, gifts and entertainment.

Nothing in this Agreement shall be construed to limit or prohibit the right or ability of UFPC or any ConceptCo-op to receive or benefit from any Sheltered Income; provided that UFPC shall share, and shall causeeach Concept Co-op to share, such Sheltered Income or the benefit thereof pro rata among each applicableOperator (including YUM) based on the dollar volume of the purchases of such Operator that gave rise tothe receipt or benefit of such Sheltered Income.

7. Approved Distributors and Suppliers.

(a) YUM acknowledges and agrees that UFPC may require, and YUM from the date hereof shall useits reasonable efforts to require of all distributors, including McLane, as a condition of approvalas an Approved Distributor, that the Approved Distributor enter into one (1) or more of: (i) aDistributor Participation Agreement applicable to the System ("DPA"); (ii) a Master DistributionAgreement applicable to the System (“MDA”); or (iii) a Participant Distribution Joinder Agreement(“Participant Agreement” and collectively with the DPA and MDA, the “Distributor Agreements”)with UFPC in UFPC's form of Distributor Agreements as amended from time to time providingamong other matters: (a) that the Approved Distributor will comply with all of the terms of anyagreements between the Approved Distributor and Member Outlet Operators; (b) for the payment bythe distributor to UFPC of a service charge as a percentage of all Goods and Equipment purchasedby the distributor from suppliers under arrangements negotiated by UFPC as part of the PurchasingPrograms; (c) for compliance by the Approved Distributor with UFPC's reasonable credit standardsand policies as in effect from time to time; (d) for the provision by the Approved Distributor toUFPC of information necessary for UFPC to administer its distributor performance monitoring andpatronage dividend programs; and (e) prohibitions on the retention by the Approved Distributor ofSheltered Income. YUM acknowledges UFPC's current standard form of Distributor Agreementswhich shall not be amended in any material respect without YUM's consent which shall not beunreasonably withheld. YUM will hold UFPC and the Concept Co-ops harmless and indemnifythem from any liability, loss or expense incurred by any of them as a result of claims by McLane ortheir affiliates or any other Approved Distributor designated by YUM as a result of UFPC's role inconducting the Purchasing Programs, or as a result of UFPC doing business in the manner requestedby YUM with McLane or their affiliates or any other Approved Distributor designated by YUMfor distribution to YUM operated Outlets or Outlets sold by YUM to franchisees obligated to useMcLane; provided, however, that YUM will not be obligated to indemnify UFPC or the Concept Co-ops: (i) for losses resulting from the sale of Goods and Equipment directly by UFPC to McLane ortheir affiliates or another Approved Distributor other than such sales requested in writing by YUM;or (ii) for losses resulting from UFPC's gross negligence.

5



(b) YUM acknowledges and agrees that UFPC may require, and YUM from the date hereof shall useits reasonable efforts to require all suppliers, as a condition of approval as an Approved Supplier,to enter into a Supplier Business Relationship Agreement applicable to the System ("SBRA") withUFPC in the form currently endorsed by YUM which shall not be amended in any material respectwithout YUM's consent which shall not be unreasonably withheld. YUM and UFPC agree that theSBRA shall provide, among other matters: (a) that the Approved Suppliers will comply with all ofthe terms of any agreements between the Approved Supplier and YUM and at all relevant timesmaintain its Approved Supplier status within the YUM system; (b) that, if requested by UFPC,supplier shall collect and remit to UFPC a sourcing fee as a percentage of all Goods and Equipmentsold by the supplier to Operators under arrangements negotiated by UFPC as part of the PurchasingPrograms; (c) that the Approved Supplier will only permit UFPC-designated purchasers to purchaseGoods and Equipment on the terms of the SBRA; (d) for the provision by the Approved Supplierto UFPC of information necessary for UFPC to administer its supplier performance monitoring andpatronage dividend programs; (e) that the Approved Supplier shall warrant its Goods and Equipmentand maintain insurance as required by YUM; (f) prohibitions on the payment by the ApprovedSupplier of Sheltered Income; (g) appropriate indemnities of UFPC and Operators by the ApprovedSupplier for breaches of the SBRA; and (h) that the Approved Supplier adhere to YUM-requiredrecalls or retrofits of Goods and Equipment.

8. YUM Programs. In connection with YUM's role as franchisor in the YUM System, consistent with the termsof the Franchise Agreements, YUM has certain exclusive rights and obligations including the followingexclusive rights or obligations with respect to "Brand Management" at its own cost and expense:

(a) To initiate and to provide UFPC and the Concept Co-ops information sales forecasts, estimates ofusage of Goods and Equipment, marketing, advertising and promotional plans and materials, newproduct introductions and roll-outs, and product withdrawals;

(b) To make strategic product decisions and to develop new products and product modifications;

(c) To conduct research and development and product testing activities;

(d) To establish safety and quality assurance standards and procedures;

(e) To analyze product warranty and liability issues and establish recall procedures and conduct recallsof unsafe or deficient Goods and Equipment;

(f) To monitor the performance of each Approved Supplier and to monitor the safety and qualityperformance of each Approved Distributor; and

(g) To manage with UFPC the exhaustion of inventories for Goods and Equipment which are withdrawnfrom the System.

UFPC acknowledges that Brand Management is YUM's exclusive responsibility. Nothing in this Section 8 isintended to modify or change the terms of any Franchise Agreement except as provided in Recital G to thisAgreement.

9. Certain UFPC Obligations.

(a) As the designated purchasing organization and purchasing agent for the YUM System in the Area,UFPC, working with the Concept Co-ops, shall have the sole and exclusive responsibility



6



at its own cost and expense to administer and conduct the Purchasing Programs and to negotiatepurchasing arrangements for Goods and Equipment for the System in the Area. UFPC, working withthe Concept Co-ops and YUM, shall administer the Purchasing Programs focused on the Mission.

(b) UFPC shall not conduct purchasing programs or act as purchasing agent or in any similar capacityexcept on behalf of UFPC, the Concept Co-ops, YUM, Operators of Outlets, the Long John Silver'srestaurant system, the purchasing cooperative for Long John Silver's franchisees known as the LongJohn Silver's National Purchasing Co-op, Inc., the A&W All American Food restaurant system andthe purchasing cooperative for A&W franchisees known as the A&W National Purchasing Co-op,Inc.

(c) UFPC shall permit YUM or SCM to purchase Goods and Equipment for Outlets located outsidethe Area under the Purchasing Programs on the same terms and conditions as an Operator or anApproved Distributor.

10. Cooperation. YUM and UFPC shall diligently communicate, consult and cooperate with each other tofacilitate each other's performance of their respective and joint responsibilities and duties with respectto: (a) the Purchasing Programs under this Agreement and the Operating Agreement; (b) YUM's BrandManagement; and (c) fulfillment of the Mission. YUM and UFPC will deal with each other on all mattersrelated to the Purchasing Programs and otherwise in good faith and with fair dealing.

11. Confidentiality, Competition, Non-Solicitation and Trademarks. YUM and UFPC each acknowledge thatas a consequence of their relationship with each other and the Purchasing Programs, trade secrets andinformation of a proprietary or confidential nature relating to the business of YUM and the business of UFPCand the Concept Co-ops may be disclosed to and/or developed by each other, including, without limitation,information about trade secrets, products, services, Goods and Equipment, licenses, costs, sales and pricinginformation, and any other information that may not be known generally or publicly outside of YUM andUFPC (collectively "Confidential Information").

(a) YUM and UFPC each acknowledge that such Confidential Information is generally not known inthe trade, and is of considerable importance to YUM and UFPC and the Concept Co-ops, and eachagree that their relationship to each other with respect to such information shall be fiduciary innature. YUM and UFPC expressly agree that during the term of this Agreement, and for a periodof two (2) years thereafter, each will hold in confidence and not disclose and not make use ofany such Confidential Information, except as required in the course of their relationship with eachother and the conduct of the Purchasing Programs, and except: (i) as requested or required bylaw or regulation or any judicial administrative or governmental authority; (ii) for disclosure to itsdirectors, officers, employees, attorneys, advisors or agents who need to review the ConfidentialInformation in connection with the conduct of its respective businesses (it being understood thatsuch directors, officers, employees, advisors and agents will be informed of the confidential natureof such information) or to any rating agency; (iii) in the course of any litigation or court proceedinginvolving YUM and UFPC concerning this Agreement; and (iv) for disclosure of information that(A) was or becomes generally available to the public other than as a result of a disclosure by itsdirectors, officers, employees, advisors or agents in breach of this provision; (B) was availableto it on a non-confidential basis prior to its disclosure to it pursuant hereto; (C) is obtained by iton a non-confidential basis from a source other than such persons or their agents, which sourceis not prohibited from transmitting the information by a confidentiality agreement or other legalor fiduciary obligation; (D) has been authorized by it to be disseminated to persons on a non-confidential basis; or (E) after the termination of this Agreement as required to assure an orderlysupply of Goods and Equipment.



7



(b) Neither YUM nor UFPC shall, at any time during the term of this Agreement, or for a periodof two (2) years thereafter, without the advance written consent of the other, whether voluntaryor involuntary, directly or indirectly, individually, in a partnership or joint venture, or througha corporation as proprietor, employee, stockholder or consultant, or through any other businessentity or by any other means, enter into agreement (except with respect to such agreements aftertermination of this Agreement as required to assure an orderly supply of Goods and Equipment)with or solicit the employment of any present or former employees of each other for the purpose ofcausing them to: (a) leave the employee of the other; or (b) reveal or utilize Confidential Informationin such manner so as to constitute a violation of this Section 11.

(c) During the term of this Agreement, YUM shall not at any time, directly or indirectly, compete withthe Purchasing Programs administered by UFPC or the Concept Co-ops in the Area.

(d) Nothing in this Agreement shall be construed to give UFPC or the Concept Co-ops any rights withrespect to any intellectual property of YUM including any trademark or trade name registered byYUM, except pursuant to the trademark license agreement entered into between YUM and UFPCand the Concept Co-ops dated the date hereof.

12. Representations. YUM and UFPC each represent and warrant to the other as follows:

(a) It is a corporation or limited liability company duly organized under the laws of its state ofincorporation or organization. It has full capacity, right, power and authority to execute and deliverthis Agreement and each other Transaction Document to which it is a party and to perform itsobligations under this Agreement and each such Transaction Document. This Agreement and eachother Transaction Document to which it is a party constitutes its valid and legal binding obligationand is enforceable against it in accordance with its terms except as may be limited by bankruptcy,insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rightsgenerally or by equitable principles relating to enforceability. The execution and delivery of thisAgreement and each other Transaction Document to which it is a party and the consummation andconduct of the transactions contemplated hereby have been approved by all necessary action underapplicable laws governing it and any of its governing instruments.

(b) The execution and delivery of this Agreement and each other Transaction Document to which it isa party, the consummation and conduct of the transactions contemplated hereby and thereby, andthe performance and fulfillment of its obligations and undertakings hereunder and thereunder by itwill not violate any provision of, or result in the breach of, or accelerate or permit the accelerationof any performance required by the terms of its governing instruments, any contract, agreement,arrangement or undertaking to which it is a party or by which it is bound; any judgment, decree,writ, injunction, order or award of any arbitration panel, court or governmental authority; or anyapplicable law, ordinance, rule or regulation of any governmental body.

(c) There are not claims of any kind of actions, suits, proceedings, arbitrations or investigations pendingor to its knowledge, threatened in any court or before any governmental agency or instrumentalityor arbitration panel or otherwise relating to it which would interfere with the consummation orconduct of the transaction contemplated by this Agreement or any other Transaction Document, orthe performance and fulfillment of its obligations and undertakings hereunder.

8



(d) No consents, approvals, no authorizations, releases or orders are required of or by it for theauthorization of, execution and delivery of, and for the performance and consummation and conductof the transactions contemplated by this Agreement or any other Transaction Document.

"Transaction Document" means this Agreement, the Operating Agreement, the Program ManagementAgreements, and the SCM Transfer Agreement.

13. Dispute Resolution. YUM and UFPC shall each appoint one or more executives who will meet with eachother for the purpose of resolving any claim, dispute or controversy ("Dispute") between YUM and UFPCarising out of or relating to the performance of this Agreement, or any other Transaction Document, or theconduct of the Purchasing Programs. If the Dispute is not resolved by negotiation within thirty (30) days, theparties shall endeavor to settle the Dispute by mediation under the then current Center for Public Resources("CPR") Model Procedure for Mediation of Business Disputes. The neutral third party will be selected fromthe CPR panel of neutral parties with the assistance of CPR, unless the parties agree otherwise. In the eventthat the parties are unsuccessful in resolving the dispute via mediation, the parties agree promptly to resolveany dispute through binding confidential arbitration conducted in Louisville, Kentucky, in accordance withthe then current rules of the American Arbitration Association ("AAA"). In regard to such arbitration, eachparty shall be entitled to select one arbitrator and the arbitrators selected by the parties shall select a thirdarbitrator. The parties irrevocably consent to such jurisdiction for purposes of the arbitration, and judgmentmay be entered thereon in any state or federal court in the same manner as if the parties were residentsof the state of federal district in which that judgment is sought to be entered. The arbitrator shall notmake any award or decision that is not consistent with applicable law. In any action between the parties,the arbitrators may designate the prevailing party in such action which shall recover such of its costs andexpenses, including reasonable attorney fees from the non-prevailing party as the arbitrators may designate.All applicable statutes of limitations and defenses based upon the passage of time shall be tolled while therequirements of this Section 13 are being followed.

14. Term and Termination.

(a) The initial term of this Agreement shall commence on the date hereof and shall continue untilDecember 31, 2015. Either YUM or UFPC may terminate this Agreement on any December 31(beginning with December 31, 2015) upon giving at least three hundred sixty-five (365) days priorwritten notice of termination to the other party. In any event, this Agreement will terminate upon thedissolution of UFPC pursuant to Article 17 of the Operating Agreement.

(b) Each of YUM and UFPC may, at its option, effective upon written notice to the other party terminatethis Agreement immediately upon the occurrence of any of the following events:

(i) any material failure on the part of such party to duly observe or perform in any respect anyof its material covenants or agreements set forth in this Agreement or any other TransactionDocument or any material representation or warranty made by such party in this Agreementor any other Transaction Document shall fail to be correct and true when made or deemedmade, which failure continues unremedied for a period of sixty (60) days after the date onwhich written notice of such failure requiring the same to be remedied shall have been givento other party;

(ii) the entry of a decree or order by a court agency or supervisory authority having jurisdictionin the premises for the appointment of a conservator, receiver or liquidator for such party orany of the Concept Co-ops in any bankruptcy, insolvency, readjustment of debt, marshalingof assets and liabilities or similar proceedings or for



9



the winding up or liquidation of their respective affairs and the continuance of any suchdecree or order unstayed and in effect for a period of sixty (60) consecutive days; or

(iii) the consent by such party or any of the Concept Co-ops to the appointment of a conservatoror receiver or liquidator in any bankruptcy, insolvency, readjustment of debt, marshaling ofassets and liabilities, or similar proceedings of or relating to such party or Concept Co-opas of or relating to substantially all of its respective property; or such party or Concept Co-op shall admit in writing its inability to pay its debts generally as they become due, file apetition to take advantage of any applicable insolvency or reorganization statute, make anassignment for the benefit of its creditors or voluntarily suspend payment of its obligations.

(c) YUM may, at its option, terminate this Agreement effective upon at least one hundred eighty (180)days prior written notice to UFPC upon the occurrence of any of the following events:

(i) With respect to each Concept Co-op, the failure of that Concept Co-op's franchisee membersoperating traditional Member Outlets to report at least the percentage specified below of thegross sales reported by all System franchisee traditional Member Outlets of each concept inthe Area.

Concept Percentage

Kentucky Fried Chicken 50%

Pizza Hut 50%

Taco Bell 50%

(ii) Any Transaction Document to which YUM is a party shall have terminated in accordancewith its terms causing material detriment to YUM.

(d) No termination of this Agreement shall relieve a party of such party's obligations created under thisAgreement for the period prior to termination.

15. [Reserved]

16. Miscellaneous.

(a) Notices. All notices, approvals, consents and demands required or permitted under this Agreementshall be in writing and sent by hand delivery, facsimile, overnight mail, certified mail or registeredmail, postage prepaid, to the parties at their addresses indicated below, and shall be deemed givenwhen delivered by hand delivery, transmitted by facsimile or mailed by overnight, certified orregistered mail. Either party may specify a different address by notifying the other party in writingof the different address.

10



If to YUM:

Mr. Christian L. CampbellYUM! Brands, Inc.Law Department1441 Gardiner LaneLouisville, Kentucky 40213

If to UFPC:

950 Breckinridge Lane ‑ Suite 300Louisville, Kentucky 40207Attention: President

(b) Governing Law. This Agreement and the rights of the parties to this Agreement shall be governedby and interpreted in accordance with the laws of the Commonwealth of Kentucky, without regardto or application of its conflicts of law principles.

(c) Benefit and Binding Effect. Except as otherwise specifically provided in this Agreement, thisAgreement shall be binding upon and shall inure to the benefit of the parties to this Agreement, andtheir legal representatives, successors and permitted assigns.

(d) Pronouns and Number. Wherever from the context it appears appropriate, each term stated in eitherthe singular or the plural shall include the singular and the plural, and pronouns stated in either themasculine, feminine or neuter gender shall include the masculine, feminine and neuter gender.

(e) Headings; Schedules. The headings contained in this Agreement are inserted only as a matter ofconvenience, and in no way define, limit or extend the scope or intent of this Agreement or anyprovision of this Agreement. The Schedules to this Agreement are incorporated into this Agreementby this reference and expressly made a part of this Agreement.

(f) Partial Enforceability. If any provision of this Agreement, or the application of any provision to anyperson or entity or circumstance shall be held invalid, illegal or unenforceable, then the remainder ofthis Agreement, or the application of that provision to persons or entities or circumstances other thanthose with respect to which it is held invalid, illegal or unenforceable, shall not be affected thereby.

(g) Entire Agreements. Except for the SCM Transfer Agreement and Operating Agreement, thisAgreement constitutes the entire understanding between YUM and UFPC with respect to the subjectmatter hereof and shall supersede all prior and contemporaneous agreements of the parties to thisAgreement with respect to the matters to which this Agreement pertains. This Agreement may notbe amended except in a writing signed by both parties.

(h) Enforcement. Notwithstanding the provisions of Section 13, in the event of a material breach orthreatened material breach by a party of any of the material provisions of this Agreement, theother party shall be entitled to obtain a temporary restraining order and temporary and permanentinjunctive relief without the necessity of proving actual damages by reason of such breach orthreatened breach, and to the extent permissible under the applicable statutes and rules of procedure,a temporary injunction or restraining order may be granted immediately upon the commencement ofany such suit and without notice.



11



(i) No Waiver. No waiver by any party to this Agreement at any time of a breach by any other party ofany provision of this Agreement to be performed by such other party shall be deemed a waiver ofany similar or dissimilar provisions of this Agreement at the same or any prior or subsequent time.

(j) Third Party Beneficiaries. It is not intended that any person or entity be a third party beneficiary ofthis Agreement other than the Concept Co-ops.

(k) Public Announcements. All public announcements about UFPC shall be made by UFPC ratherthan YUM or any other party; provided, however, that YUM may nevertheless make such publicannouncements as their respective counsel deem required by law.

12



Signed:

YUM! Brands, Inc.

By /s/ Christian L. Campbell

Title: Senior Vice President, General Counsel and Secretary

Date: December 30, 2011

Unified Foodservice Purchasing Co-op, LLC

By /s/ Daniel E. Woodside

Title: President & CEO

Date: December 29, 2011

13



Schedule 1

Excluded Commitments

1. Any contract or commitment to purchase fountain beverages for use in Outlets owned by Yum! during the term of theConcepts' existing contractual arrangements with Pepsi Co., Inc. and/or Dr. Pepper/Seven Up, Inc. with respect to suchOutlets.

14



Exhibit 12.1YUM! Brands, Inc.

Ratio of Earnings to Fixed Charges Years Ended 2011 - 2007(In millions except ratio amounts)

53 Weeks 52 Weeks2011 2010 2009 2008 2007

Earnings:

Pretax income from continuing operations beforecumulative effect of accounting changes $ 1,659 $ 1,594 $ 1,396 $ 1,291 $ 1,191

50% or less owned Affiliates' interests, net (8) (7) (1) (1) (7)

Interest Expense 203 212 229 273 217

Interest portion of net rent expense 314 298 276 258 243

Earnings available for fixed charges $ 2,168 $ 2,097 $ 1,900 $ 1,821 $ 1,644

Fixed Charges:

Interest Expense $ 204 $ 213 $ 230 $ 273 $ 217Interest portion of net rent expense 314 298 276 258 243

Total fixed charges $ 518 $ 511 $ 506 $ 531 $ 460

Ratio of earnings to fixed charges 4.19 4.10 3.75 3.43 3.57



Exhibit 21.1SUBSIDIARIES OF YUM! BRANDS, INC.

AS OF DECEMBER 31, 2011

State or Country ofName of Subsidiary Incorporation

ABR Insurance Company VermontACN 002 543 286 Pty. Ltd. AustraliaACN 002 812 151 Pty. Ltd. AustraliaACN 003 007 690 Pty. Ltd. AustraliaACN 003 190 163 Pty. Ltd. AustraliaACN 003 190 172 Pty. Ltd. AustraliaACN 003 273 854 Pty. Ltd AustraliaACN 004 240 046 Pty. Ltd. AustraliaACN 005 041 547 Pty. Ltd. AustraliaACN 009 064 706 Pty. Ltd. AustraliaACN 010 355 772 Pty. Ltd. AustraliaACN 054 055 917 Pty. Ltd. AustraliaACN 084 994 374 Pty. Ltd. AustraliaACN 085 239 961 Pty. Ltd. (SA1) AustraliaACN 085 239 998 Pty. Ltd. (SA2) AustraliaACN 103 640 393 Pty. Ltd. AustraliaAshton Fried Chicken Pty. Ltd. AustraliaBeijing KFC Co., Ltd. ChinaBeijing Pizza Hut Co., Ltd. ChinaBodden Holding Sarl LuxembourgBrownstone Holdings Sarl LuxembourgChangsha KFC Co., Ltd. ChinaChongqing KFC Co., Ltd. ChinaCyprus Caramel Restaurants Limited CyprusDalian KFC Co., Ltd. ChinaDongguan KFC Co., Ltd. ChinaFinger Lickin' Chicken Limited United KingdomGCTB, Inc. FloridaGloucester Properties Pty. Ltd. AustraliaHangzhou KFC Co., Ltd. ChinaHuan Sheng Advertisng (Shanghai) Company ChinaInventure Restaurantes Ltda. Brazil




Kentucky Fried Chicken (Germany) Restaurant Holdings GmbH GermanyKentucky Fried Chicken (Great Britain) Limited United KingdomKentucky Fried Chicken (Great Britain) Services Limited United KingdomKentucky Fried Chicken de Mexico, S. de R.L. de C.V. MexicoKentucky Fried Chicken Global B.V. NetherlandsKentucky Fried Chicken International Holdings, Inc. DelawareKentucky Fried Chicken Pty. Ltd. AustraliaKFC Advertising, Ltd. United KingdomKFC Chamnord SAS FranceKFC Corporation DelawareKFC France Societe Par Actions Simplifiee FranceKFC Holding Co. DelawareKFC Holdings B.V. NetherlandsKFC Restaurants Spain S.L. SpainKFC U.S. Properties, Inc. DelawareKRE Holdings, LLC DelawareKunming KFC Co., Ltd. ChinaLanzhou KFC Co., Ltd. ChinaMultibranding Pty. Ltd. AustraliaNanchang KFC Co., Ltd. ChinaNanjing KFC Co., Ltd. ChinaNanning KFC Co., Ltd. ChinaNewcastle Fried Chicken Pty. Ltd. AustraliaNorfolk Fast Foods Limited United KingdomNorthside Fried Chicken Pty Limited AustraliaNovo BL FranceNovo Re IMMO FranceOperadora Tlaxcor, S. de R.L. de C.V. MexicoPCNZ Limited MauritiusPHP de Mexico Inmobiliaria, S. de R.L. de C.V. MexicoPizza Hut (UK) Limited United KingdomPizza Hut Australia Pty Limited f/k/a ACN 054 121 416 Pty. Ltd. AustraliaPizza Hut Del Distrito, S. de R.L. de C.V. MexicoPizza Hut FSR Advertising Limited United KingdomPizza Hut HSR Advertising Limited United Kingdom




Pizza Hut International, LLC DelawarePizza Hut Korea Limited f/k/a Pizza Hut Korea Co., Ltd. Korea, Republic ofPizza Hut Mexicana, S de RL de CV MexicoPizza Hut of America, Inc. DelawarePizza Hut of North America, Inc. TexasPizza Hut, Inc. CaliforniaQingdao KFC Co., Ltd. ChinaRestaurant Holdings (UK) Limited United KingdomRestaurant Holdings Limited United KingdomSCI KFC Cenon FranceSEPSA S.N.C. FranceShanghai KFC Co., Ltd. ChinaShanghai Pizza Hut Co., Ltd. ChinaShantou KFC Co., Ltd. ChinaSoc. Maintenance Des 2 Roues SAS FranceSociete Civile Immobiliere Duranton a/k/a SCI Duranton FranceSouthern Fast Foods Limited (f/k/a Milne Fast Foods Limited) United KingdomSpizza 30 Societe Par Actions Simplifee FranceSpizza Immo Sarl FranceStealth Investments Sarl LuxembourgSuffolk Fast Foods Limited United KingdomSunhill Holdings Sarl LuxembourgSuzhou KFC Co., Ltd. ChinaTaco Bell Corp CaliforniaTaco Bell of America, LLC DelawareTaiYuan KFC Co., Ltd. ChinaTHC I Limited MaltaTHC II Limited MaltaTHC III Limited MaltaTHC IV Limited MaltaTHC V Limited MaltaTianjin KFC Co., Ltd. ChinaValleythorn Limited United KingdomWandle Investments Ltd. Hong KongWest End Restaurants (Holdings) Limited United KingdomWest End Restaurants (Investments) Limited United Kingdom




West End Restaurants Limited United KingdomWuxi KFC Co., Ltd. ChinaXiamen KFC Co., Ltd. ChinaXinjiang KFC Co., Ltd. ChinaY.C.H. S.a.r.l. LuxembourgYA Company One Pty. Ltd. AustraliaYB Operadora, S. de R.L. de C.V. MexicoYGR America, LLC DelawareYGR Holdings, LLC DelawareYGR International Limited United KingdomYGR US, LLC DelawareYIF US, LLC DelawareYRI Europe S.a.r.l. LuxembourgYRI Hong Kong II Limited Hong KongYRI Hong Kong IV Limited Hong KongYum Restaurants Espana, S.L. SpainYum Restaurants International (Proprietary) Limited South AfricaYum Restaurants Services Group, Inc. DelawareYum! Asia Franchise Pte Ltd SingaporeYum! Asia Holdings Pte. Ltd. SingaporeYum! Australia Equipment Pty. Ltd. AustraliaYum! Australia Holdings I LLC DelawareYum! Australia Holdings II LLC DelawareYum! Australia Holdings III LLC DelawareYum! Australia Holdings Limited Cayman IslandsYum! Brands Canada Management Holding Company Nova ScotiaYum! Brands Canada Management LP CanadaYum! Brands Mexico Holdings II LLC DelawareYum! Food (Hangzhou) Co., Ltd. ChinaYum! Food (Shanghai) Co., Ltd. ChinaYum! Franchise de Mexico, S. de R.L. MexicoYum! Franchise I LP CanadaYum! Franchise II LLP United KingdomYum! Franchise III AustraliaYum! Global Investments I B.V. NetherlandsYum! Global Investments II B.V. Netherlands




Yum! Global Investments III, LLC DelawareYum! Holdings UK Limited United KingdomYum! International Finance Company S.a.r.l. LuxembourgYum! International Participations S.a.r.l. LuxembourgYum! Luxembourg Investments S.a.r.l. LuxembourgYum! Mexico, S. De. R. L. de CV MexicoYum! Realty Holdings, Inc. CanadaYum! Restaurant Holdings United KingdomYum! Restaurant Holdings (Great Britain) Limited United KingdomYum! Restaurantes do Brasil Ltda. BrazilYum! Restaurants (Canada) Company CanadaYum! Restaurants (Chengdu) Co., Ltd. ChinaYum! Restaurants (China) Investment Co., Ltd. ChinaYum! Restaurants (Fuzhou) Co., Ltd. ChinaYum! Restaurants (Guangdong) Co., Ltd. ChinaYum! Restaurants (Hong Kong) Ltd. Hong KongYum! Restaurants (India) Private Limited IndiaYum! Restaurants (NZ) Ltd. New ZealandYum! Restaurants (Shenyang) Co., Ltd. ChinaYum! Restaurants (Shenzhen) Co., Ltd. ChinaYum! Restaurants (UK) Limited United KingdomYum! Restaurants (Wuhan) Co., Ltd. ChinaYum! Restaurants (Xian) Co., Ltd. ChinaYum! Restaurants Asia Private Ltd. SingaporeYum! Restaurants Australia Pty Limited AustraliaYum! Restaurants Australia Services Pty Ltd AustraliaYum! Restaurants China Holdings Limited Hong KongYum! Restaurants Consulting (Shanghai) Co., Ltd. ChinaYum! Restaurants Europe Limited United KingdomYum! Restaurants France SAS FranceYum! Restaurants Germany GmbH GermanyYum! Restaurants Holding, S. de R.L. de C.V. MexicoYum! Restaurants International (Canada) Company CanadaYum! Restaurants International (MENAPAK) WLL BahrainYum! Restaurants International (Thailand) Co., Ltd. ThailandYum! Restaurants International Holdings, Ltd. Delaware




Yum! Restaurants International Limited United KingdomYum! Restaurants International Ltd. & Co. KG GermanyYum! Restaurants International Management S.a.r.l. LuxembourgYum! Restaurants International Russia and CIS LLC Russian FederationYum! Restaurants International Russia LLC RussiaYum! Restaurants International S.a.r.l. LuxembourgYum! Restaurants International Switzerland S.a.r.l. SwitzerlandYum! Restaurants International, Inc. DelawareYum! Restaurants International, S de RL de CV MexicoYum! Restaurants Limited United KingdomYum! Restaurants Marketing Private Limited IndiaYum! Restaurants New Zealand Services Pty. Ltd AustraliaYum! Restaurants Spolka Z Ograniczona Odpowiedziainoscia PolandYum! Restaurants, S de RL de CV MexicoYumsop Pty Limited AustraliaZhengzhou KFC Co., Ltd. China



Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and ShareholdersYUM! Brands, Inc.:

We consent to the incorporation by reference in the registration statements listed below of YUM! Brands, Inc. andSubsidiaries (YUM) of our report dated February 20, 2012, with respect to the consolidated balance sheets of YUM as ofDecember 31, 2011 and December 25, 2010, and the related consolidated statements of income, cash flows, and shareholders'equity (deficit) and comprehensive income (loss) for each of the fiscal years in the three-year period ended December 31,2011, and the effectiveness of internal control over financial reporting as of December 31, 2011, which report appears in theDecember 31, 2011 annual report on Form 10-K of YUM.

Description Registration Statement Number

Form S-3 and S-3/A

Debt Securities 333-160941YUM! Direct Stock Purchase Program 333-46242

Form S-8

Restaurant Deferred Compensation Plan 333-36877, 333-32050Executive Income Deferral Program 333-36955YUM! Long-Term Incentive Plan 333-36895, 333-85073, 333-32046, 333-170929SharePower Stock Option Plan 333-36961YUM! Brands 401(k) Plan 333-36893, 333-32048, 333-109300YUM! Brands, Inc. Restaurant General Manager

Stock Option Plan 333-64547YUM! Brands, Inc. Long-Term Incentive Plan 333-32052, 333-109299

/s/ KPMG LLPLouisville, KentuckyFebruary 20, 2012



Exhibit 31.1CERTIFICATION

I, David C. Novak, certify that:

1. I have reviewed this report on Form 10-K of YUM! Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant, as of,and for, the periods presented in this report.

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting tobe designed under our supervision, to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period coveredby this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred duringthe registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) thathas materially affected, or is reasonably likely to materially affect, the registrant's internal control over financialreporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors(or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize andreport financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role inthe registrant's internal control over financial reporting.



Date: February 20, 2012 /s/ David C. NovakChairman, Chief Executive Officer and President



Exhibit 31.2CERTIFICATION

I, Richard T. Carucci, certify that:

1. I have reviewed this report on Form 10-K of YUM! Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant, as of,and for, the periods presented in this report.

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this reportis being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting tobe designed under our supervision, to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period coveredby this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred duringthe registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) thathas materially affected, or is reasonably likely to materially affect, the registrant's internal control over financialreporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (orpersons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize andreport financial information; and



(b) any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting.

Date: February 20, 2012 /s/ Richard T. CarucciChief Financial Officer



Exhibit 32.1

CERTIFICATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICERPURSUANT TO

18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of YUM! Brands, Inc. (the “Company”) on Form 10-K for the year endedDecember 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I,David C. Novak, Chairman, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Actof 1934; and

2. the information contained in the Annual Report fairly presents, in all material respects, the financial conditionand results of operations of the Company.

Date: February 20, 2012 /s/ David C. NovakChairman, Chief Executive Officer and President

A signed original of this written statement required by Section 906 has been provided to YUM! Brands, Inc. and will beretained by YUM! Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO

18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of YUM! Brands, Inc. (the “Company”) on Form 10-K for the year endedDecember 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I,Richard T. Carucci, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities ExchangeAct of 1934; and

2. the information contained in the Annual Report fairly presents, in all material respects, the financial conditionand results of operations of the Company.

Date: February 20, 2012 /s/ Richard T. CarucciChief Financial Officer

A signed original of this written statement required by Section 906 has been provided to YUM! Brands, Inc. and will beretained by YUM! Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.



12 Months EndedLeases (Tables) Dec. 31, 2011Leases [Abstract]Future minimum commitments and amounts to bereceived as lessor or sublessor under non-cancelableleases

Future minimum commitments and amounts to be received aslessor or sublessor under non-cancelable leases are set forth below:




$ 437 $ 5,337 $ 25 $ 335

Details of rental expense and income The details of rental expense and income are set forth below:


$ 858 $ 723 $ 664




3 Months Ended 4 MonthsEnded 12 Months EndedEarnings Per Common

Share ("EPS") (Details)(USD $)

In Millions, except Per Sharedata, unless otherwise

specified

Sep.03,

2011

Jun.11,

2011

Mar.19,

2011

Sep.04,

2010

Jun.12,

2010

Mar.20,

2010

Dec.31,

2011

Dec.25,

2010

Dec.31,

2011

Dec.25,

2010

Dec.26,

2009

Earnings Per Share [Abstract]Net Income - YUM! Brands, Inc. $

383$316

$264

$357

$286

$241

$356

$274

$1,319

$1,158

$1,071

Weighted-average common sharesoutstanding (for basic calculation) (inshares)

469 474 471

Effect of dilutive share-based employeecompensation (in shares) 12 12 12

Weighted-average common and dilutivepotential common shares outstanding (fordiluted calculation) (in shares)

481 486 483

Basic EPS (in dollars per share) $0.82

$0.67

$0.56

$0.76

$0.61

$0.51

$0.77

$0.58

$2.81

$2.44

$2.28

Diluted EPS (in dollars per share) $0.80

$0.65

$0.54

$0.74

$0.59

$0.50

$0.75

$0.56

$2.74

$2.38

$2.22

Unexercised employee stock options andstock appreciation rights (in millions)excluded from the diluted EPS computation(in shares)

4.2 [1] 2.2 [1] 13.3 [1]

[1] These unexercised employee stock options and stock appreciation rights were not included in thecomputation of diluted EPS because to do so would have been antidilutive for the periods presented.



12 Months EndedSelected Quarterly FinancialData (Unaudited) (Tables) Dec. 31, 2011

Quarterly FinancialInformation Disclosure[Abstract]Selected income (loss) andcommon share financial data 2011

FirstQuarter

SecondQuarter

ThirdQuarter

FourthQuarter Total

Revenues:Company sales $ 2,051 $ 2,431 $ 2,854 $ 3,557 $ 10,893Franchise and license fees andincome

374 385 420 554 1,733

Total revenues 2,425 2,816 3,274 4,111 12,626Restaurant profit 360 386 494 513 1,753Operating Profit(a) 401 419 488 507 1,815Net Income – YUM! Brands, Inc. 264 316 383 356 1,319Basic earnings per common share 0.56 0.67 0.82 0.77 2.81Diluted earnings per common share 0.54 0.65 0.80 0.75 2.74Dividends declared per commonshare

— 0.50 — 0.57 1.07

2010First


ThirdQuarter

FourthQuarter Total


349 354 366 491 1,560

Total revenues 2,345 2,574 2,862 3,562 11,343Restaurant profit 340 366 479 478 1,663Operating Profit(b) 364 421 544 440 1,769Net Income – YUM! Brands, Inc. 241 286 357 274 1,158Basic earnings per common share 0.51 0.61 0.76 0.58 2.44Diluted earnings per common share 0.50 0.59 0.74 0.56 2.38Dividends declared per commonshare

0.21 0.21 — 0.50 0.92

(a) Includes net losses of $65 million primarily related to the LJS and A&W divestitures, $88million primarily related to refranchising international markets and $28 million primarilyrelated to the U.S. business transformation measures and U.S. refranchising in the first,third and fourth quarters of 2011, respectively. See Note 4. The fourth quarter of 2011also includes the $25 million impact of the 53rd week. See Note 2.

(b) Includes net losses of $66 million and $19 million in the first and fourth quarters of2010, respectively, related primarily to the U.S. business transformation measures andrefranchising international markets. See Note 4.



12 Months EndedIncome Taxes (Details) (USD$)

In Millions, unless otherwisespecified

Dec. 31, 2011 Dec. 25, 2010 Dec. 26, 2009

U.S. and foreign income before income taxes[Abstract]U.S. $ 266 $ 345 $ 269Foreign 1,393 1,249 1,127Income Before Income Taxes 1,659 [1],[2],[3],[4] 1,594 [1],[3],[4] 1,396 [1],[2],[3],[5]

Details of income tax provision (benefit)[Abstract]Current: Federal 78 155 (21)Current: Foreign 374 356 251Current: State 9 15 11Total current income tax provision (benefit) 461 526 241Deferred: Federal (83) (82) 92Deferred: Foreign (40) (29) (30)Deferred: State (14) 1 10Total deferred income tax provision (benefit) (137) (110) 72Total income tax provision (benefit) 324 416 313Income Tax Expense (Benefit), ContinuingOperations, Income Tax Reconciliation[Abstract]U.S. federal statutory tax 580 558 489State income tax, net of federal tax benefit 2 12 14Statutory rate differential attributable to foreignoperations (218) (235) (159)

Adjustments to reserves and prior years 24 55 (9)Net tax benefit from LJS and A&W divestitures (72) 0 0Change in valuation allowance 22 22 (9)Other, net (14) 4 (13)Total income tax provision (benefit) 324 416 313Effective income tax rate reconciliation[Abstract]U.S. federal statutory rate (in hundredths) 35.00% 35.00% 35.00%State income tax, net of federal tax benefit (inhundredths) 0.10% 0.70% 1.00%

Statutory rate differential attributable to foreignoperations (in hundredths) (13.10%) (14.70%) (11.40%)

Adjustments to reserves and prior years (inhundredths) 1.40% 3.50% (0.60%)

Net tax benefit from LJS and A&W divestitures (inhundreths) (4.30%) 0.00% 0.00%

Change in valuation allowance (in hundredths) 1.30% 1.40% (0.70%)



Other, net (in hundredths) (0.90%) 0.20% (0.90%)Effective income tax rate (in hundredths) 19.50% 26.10% 22.40%Change in adjustments to reserves and prior years,impact on effective tax rate (in hundredths) (1.60%)

Income Tax And Effective Tax Rate [Abstract]Gain on consolidation of a former unconsolidatedaffiliate in China 0 0 (68) [6]

Affiliate in Shanghai, China [Member]Income Tax And Effective Tax Rate [Abstract]Gain on consolidation of a former unconsolidatedaffiliate in China (68)

Income tax expense (benefit) related toconsolidation of a former unconsolidated affiliate 0

LJS and AWIncome Tax And Effective Tax Rate [Abstract]Tax benefit recognized on business divestitures (117)Tax benefit on net pre-tax losses and other costsrelated to business divestitures (32)

Pre-tax losses recognized on business divestitures 86Net tax benefit on business divestitures, includingbenefit on pre-tax losses and valuation allowancerelated to capital losses

(104)

U.S. | LJS and AWIncome Tax And Effective Tax Rate [Abstract]Goodwill impairment loss 26Income tax expense (benefit) related to goodwillimpairment 0

U.S. state [Member] | LJS and AWIncome Tax And Effective Tax Rate [Abstract]Tax benefit recognized on business divestitures (8)Current Year OperationsChanges in valuation allowance [Roll Forward]Valuation Allowance, Change in Amount 15 25 16Current Year Operations | LJS and AWChanges in valuation allowance [Roll Forward]Valuation Allowance, Change in Amount 45Current Year Operations | U.S. state [Member] | LJSand AWChanges in valuation allowance [Roll Forward]Valuation Allowance, Change in Amount 4Changes in JudgementChanges in valuation allowance [Roll Forward]Valuation Allowance, Change in Amount $ 7 $ (3) $ (25)[1] 2011, 2010 and 2009 include approximately $21 million, $9 million and $16 million, respectively, of charges

relating to U.S. general and administrative productivity initiatives and realignment of resources. See Note 4.



[2] 2011 represents net losses resulting from the LJS and A&W divestitures. 2009 includes a $26 million chargeto write-off goodwill associated with our LJS and A&W businesses in the U.S. See Note 9.

[3] Includes equity income from investments in unconsolidated affiliates of $47 million, $42 million and $36million in 2011, 2010 and 2009, respectively, for China.

[4] 2011 and 2010 include depreciation reductions arising from the impairment of KFC restaurants we offered tosell of $10 million and $9 million, respectively. 2011 includes a depreciation reduction arising from theimpairment of Pizza Hut UK restaurants we decided to sell in 2011 of $3 million. See Note 4.

[5] 2009 includes a $68 million gain related to the acquisition of additional interest in and consolidation of aformer unconsolidated affiliate in China. See Note 4.

[6] See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in Shanghai,China.



12 Months Ended 12 Months Ended 12 Months Ended 3 MonthsEnded

12MonthsEnded

12 Months Ended

Items AffectingComparability of Net

Income and Cash Flows(Details) (USD $)


Dec. 31,2011

restaurants

Dec. 25,2010

Dec.26,

2009

Dec. 31,2011

ClosedStores

[Member]

Dec. 25,2010

ClosedStores

[Member]

Dec.31,

2011LJSandAW

Dec. 31,2011

LJS andAW

Closuresand

impairment(income)expenses

Dec.31,

2011China

Dec.25,

2010China

Dec.26,

2009China

Dec.31,

2011YRI

Dec. 25,2010YRI

Dec.26,

2009YRI

Jul. 01,2010YRI

Russiarestaurants

Dec.25,

2010YRI

Mexico

Dec.31,

2011YRILJSandAW

Dec. 31,2011YRIPHUK

restaurants

Dec. 31, 2011YRIPHUK

Refranchising(gain) loss

Dec. 25,2010YRIPH

Mexicorestaurants

Dec.26,

2009YRIPH

SouthKorea

Oct. 31,2011YRIKFCSouthAfrica

restaurants

Dec. 25,2010YRIKFC

Mexicorestaurants

Dec. 25,2010YRIKFC

Taiwanrestaurants

Dec.26,

2009YRIKFC

Taiwan

Dec.31,

2011U.S.

Dec.25,

2010U.S.

Dec.26,

2009U.S.

Dec. 31,2011U.S.

EmployeeSeverance[Member]

Dec. 25,2010U.S.


Dec. 26,2009U.S.


Dec.31,

2011U.S.LJSandAW

Dec.26,

2009U.S.LJSandAW

Dec. 31,2011U.S.KFC

restaurants

Dec. 25,2010U.S.KFC

restaurants

Dec. 26,2009U.S.KFC

Franchiseand

licensefees andincome

Dec. 31,2011Total

amountallocated

tosegments

Dec. 25,2010Total

amountallocated

tosegments

Dec. 26,2009Total

amountallocated

tosegments

Mar. 24,2012LittleSheepGroup

Limited[Member]

Dec. 26,2009LittleSheepGroup

Limited[Member]

Feb. 01,2012LittleSheepGroup

Limited[Member]

Dec. 31,2011LittleSheepGroup

Limited[Member]

Dec. 26,2009

Affiliatein

Shanghai,China

[Member]

Dec. 25,2010

Affiliatein

Shanghai,China

[Member]KFC

Dec. 26,2009

Affiliatein

Shanghai,China

[Member]KFC

May 04,2009

Affiliate inShanghai,

China[Member]

KFCrestaurants

Facility Actions [Line Items]Number of restaurantsrefranchised 123 222 124

Number of restaurants offeredor decided to refranchise 350 250 600

Total losses related to long-lived assets held for use andmeasured at fair value on anon-recurring basis

$ 74

Goodwill impairment loss 0 12 7 26U.S. BusinessTransformation [Abstract]Charges relating to U.S.general and administrativeproductivity initiatives andrealignment of resources

21 9 16

Unpaid portion of currentseverance liability related toU.S. Business Transformation

18 1

U.S. Business Transformationseverance payments 4 7 26

Investments In US Brands 32Income tax expense (benefit)related to goodwill impairment 0

Depreciation reduction fromthe impairment of restaurantswe offered to sell

3 10 9

Divestiture of Business[Abstract]Pre-tax losses recognized onbusiness divestitures 86 80

Net tax benefit on businessdivestitures, including benefiton pre-tax losses and valuationallowance related to capitallosses

(104)

Percentage impact onFranchise license fees andincome

1.00% 5.00%

Percentage impact onOperating Profit 1.00% 1.00%

Business CombinationCurrent ownership percentage 93.00% 27.00% 58.00%Escrow deposit for pendingacquisition 300 0 300

Letter of credit provided forpending acquisition 300

Number of restaurantsacquired 68

Number of company ownedstores acquired 50

Number of franchise ownedstores to which we gained fullrights and responsibilities asfranchisor

81

Amount of cash paid toacquire interest in restaurants 60 71

Amount of long term notereceivable settled as part ofacquisition

11

Amount of long term debtassumed as part of acquisition 10

Remaining balance of thepurchase price anticipated tobe paid in cash

12

Additional percentage ofownership acquired (inhundredths)

66.00% 7.00%

Approximate number ofrestaurants operated 7,400 200

Amount paid to acquire anadditional ownershippercentage

584 103 12

Ownership percentage prior toacquisition (in hundredths) 51.00%

Recorded value of previouslyheld ownership prior toacquisition

17

Gain on consolidation of aformer unconsolidated affiliatein China

0 0 (68) [1] (68) (68)

Income tax expense (benefit)related to consolidation of aformer unconsolidated affiliate

0

Impact on Company Sales dueto consolidation of a formerunconsolidated affiliate inChina

98

Impact on Franchise andlicense fees and income due toconsolidation of a formerunconsolidated affiliate inChina

6

Impact on Operating Profit dueto consolidation of a formerunconsolidated affiliate inChina

3

Facility Actions [Abstract]Refranchising (gain) loss 72 [2],[3] 63 [2],[4],[5] (26) [4] (14) (8) (3) 69 [3] 53 [4],[5] 11 [4] 52 10 17 [2] 18 [2] (34)Store closure (income) costs (1) [6] 0 [6] (4) [6] 4 [6] 2 [6] 0 [6] 4 [6] 3 [6] 13 [6] 7 [6] 5 [6] 9 [6]

Store impairment charges 13 16 13 18 12 22 [7] 17 14 33 48 42 68 [7]

Closure and impairment(income) expenses 135 47 103 12 16 9 22 14 22 21 17 46 55 47 77

Number of KFCs a LatinAmerican franchise buyer willserve as the master franchisorfor Mexico

102

Number of PHs a LatinAmerican franchise buyer willserve as the master franchisorfor Mexico

53

Carrying value of goodwill 681 [8] 659 640 88 85 82 282 252 232 100 30 311 [8] 322 326Activity related to reservesfor remaining leaseobligations for closed stores[Roll Forward]Beginning Balance 28 27Amounts Used (12) (12)New Decisions 17 8Estimate/Decision Changes 2 0CTA/Other (1) 5Ending Balance $ 34 $ 28[1] See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in Shanghai, China.[2] U.S. refranchising losses in the years ended December 31, 2011 and December 25, 2010 are primarily due to losses on sales of and offers to refranchise KFCs in the U.S. There were approximately 250 and 600 KFC restaurants offered for refranchising as of December 31, 2011 and December 25, 2010, respectively. While we did not yet believe these KFCs met the criteria to be classified as held for sale, we did, consistent with our historical practice, review the restaurants for

impairment as a result of our offer to refranchise. We recorded impairment charges where we determined that the carrying value of restaurant groups to be sold was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as company units. For those restaurant groups deemed impaired, we wrote such restaurant groups down to our estimate of their fair values, which were basedon the sales price we would expect to receive from a franchisee for each restaurant group. This fair value determination considered current market conditions, real-estate values, trends in the KFC U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurant groups to date. The non-cash impairment charges that were recorded related to our offers to refranchise these company-operated KFC restaurants in the U.S. decreased depreciationexpense versus what would have otherwise been recorded by $10 million and $9 million in the years ended December 31, 2011 and December 25, 2010, respectively. These depreciation reductions were not allocated to the U.S. segment resulting in depreciation expense in the U.S. segment results continuing to be recorded at the rate at which it was prior to the impairment charges being recorded for these restaurants. We will continue to review the restaurant groups for any furthernecessary impairment until the date they are sold. The aforementioned non-cash impairment charges do not include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cash write-down would be recorded, consistent with our historical policy, if the restaurant groups, or any subset of the restaurant groups, ultimately meet the criteria to be classified as held for sale. We will also be required to record a charge for the fair value ofour guarantee of future lease payments for leases we assign to the franchisee upon any sale.

[3] During the year ended December 31, 2011 we decided to refranchise or close all of our remaining Company-operated Pizza Hut restaurants in the UK market. While an asset group comprising approximately 350 dine-in restaurants did not meet the criteria for held-for-sale classification as of December 31, 2011, ourdecision to sell was considered an impairment indicator. As such we reviewed this asset group for potential impairment and determined that its carrying value was notrecoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as company units. Accordingly, we wrote this asset group down to our estimate of its fair value, which is based on the sales price we would expect to receive from a buyer. This fair value determination considered current market conditions, trends in the Pizza Hut UK business, and prices for similar transactions in the restaurantindustry and resulted in a non-cash pre-tax write-down of $74 million which was recorded to Refranchising (gain) loss. This impairment charge decreased depreciation expense versus what would have otherwise been recorded by $3 million in 2011. This depreciation reduction was not allocated to the YRI segment, resulting in depreciation expense in the YRI segment results continuing to be recorded at the rate at which it was prior to the impairment charges being recorded for theserestaurants. We will continue to review the asset group for any further necessary impairment until the date it is sold. The write-down does not include any allocation of the Pizza Hut UK reporting unit goodwill in the asset group carrying value. This additional non-cash write-down would be recorded, consistent with our historical policy, if the asset group ultimately meets the criteria to be classified as held for sale. Upon the ultimate sale of the restaurants, depending on the form of thetransaction, we could also be required to record a charge for the fair value of any guarantee of future lease payments for any leases we assign to a franchisee and for the cumulative foreign currency translation adjustment associated with Pizza Hut UK. The decision to refranchise or close all remaining Pizza Hut restaurants in the UK was considered to be a goodwill impairment indicator. We determined that the fair value of our Pizza Hut UK reporting unit exceeded its carrying valueand as such there was no impairment of the approximately $100 million in goodwill attributable to the reporting unit.

[4] During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as a result of our decision to offer to refranchise our KFC Taiwan equity market. During the year ended December 25, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our December 25, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan.Neither of these losses resulted in a related income tax benefit. The amount of goodwill write-off was based on the relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fair value of the business disposed of was determined by reference to the discounted value of the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include a deduction for the anticipated royalties the franchisee willpay the Company associated with the franchise agreement entered into in connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associated with the franchise agreement entered into in connection with this refranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchising aresubstantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

[5] In the year ended December 25, 2010 we recorded a $52 million loss on the refranchising of our Mexico equity market as we sold all of our Company-owned restaurants, comprised of 222 KFCs and 123 Pizza Huts, to an existing Latin American franchise partner. The buyer is serving as the master franchisee for Mexico which had 102 KFC and 53 Pizza Hut franchise restaurants at the time of the transaction. The write-off of goodwill included in this loss was minimal as our Mexicoreporting unit included an insignificant amount of goodwill. This loss did not result in any related income tax benefit.

[6] Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company restaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores.[7] The 2009 store impairment charges for YRI include $12 million of goodwill impairment for our Pizza Hut South Korea market.[8] As a result of the LJS and A&W divestitures in 2011, we disposed of $26 million of goodwill that was fully impaired in 2009.



12 Months EndedContingencies (Details 3)(Self Insured Property And

Casualty Reserves[Member], USD $)


Dec. 31, 2011Dec. 25, 2010

Self Insured Property And Casualty Reserves [Member]Valuation and Qualifying Accounts Disclosure [Line Items]Beginning balance $ 150 $ 173Expense 55 46Payments (65) (69)Ending balance $ 140 $ 150



12 Months EndedReportable OperatingSegments (Tables) Dec. 31, 2011

Segment Reporting[Abstract]Schedule of SegmentReporting Information, bySegment [Text Block]

Revenues2011 2010 2009


$ 12,626 $ 11,343 $ 10,836

Operating Profit; Interest Expense,Net; and

Income Before Income Taxes2011 2010 2009

China (c) $ 908 $ 755 $ 596YRI 673 589 497U.S. 589 668 647Unallocated Franchise and license fees and income(a)(b) — — (32)Unallocated Occupancy and other(b)(d) 14 9 —Unallocated and corporate expenses(b)(e) (223) (194) (189)Unallocated Closures and impairment expense(b)(f) (80) — (26)Unallocated Other income (expense)(b)(g) 6 5 71Unallocated Refranchising gain (loss)(b)(h) (72) (63) 26Operating Profit 1,815 1,769 1,590Interest expense, net (156) (175) (194)




$ 628 $ 589 $ 580



$ 940 $ 796 $ 797





$ 8,834 $ 8,316 $ 7,148



$ 5,022 $ 4,964 $ 5,001

(a) Amount consists of reimbursements to KFC franchisees for installation costs of ovens forthe national launch of Kentucky Grilled Chicken. See Note 4.

(b) Amounts have not been allocated to the U.S., YRI or China Division segments forperformance reporting purposes.

(c) Includes equity income from investments in unconsolidated affiliates of $47 million, $42million and $36 million in 2011, 2010 and 2009, respectively, for China.

(d) 2011 and 2010 include depreciation reductions arising from the impairment of KFCrestaurants we offered to sell of $10 million and $9 million, respectively. 2011 includesa depreciation reduction arising from the impairment of Pizza Hut UK restaurants wedecided to sell in 2011 of $3 million. See Note 4.

(e) 2011, 2010 and 2009 include approximately $21 million, $9 million and $16 million,respectively, of charges relating to U.S. general and administrative productivity initiativesand realignment of resources. See Note 4.

(f) 2011 represents net losses resulting from the LJS and A&W divestitures. 2009 includesa $26 million charge to write-off goodwill associated with our LJS and A&W businessesin the U.S. See Note 9.

(g) 2009 includes a $68 million gain related to the acquisition of additional interest in andconsolidation of a former unconsolidated affiliate in China. See Note 4.


(i) China includes investments in 4 unconsolidated affiliates totaling $167 million, $154million and $144 million, for 2011, 2010 and 2009, respectively.

(j) Primarily includes cash, deferred tax assets and property, plant and equipment, net,related to our office facilities.




Reconciliation of OtherSignificant Reconciling Itemsfrom Segments toConsolidated [Text Block]



$ 628 $ 589 $ 580



$ 940 $ 796 $ 797



$ 8,834 $ 8,316 $ 7,148



$ 5,022 $ 4,964 $ 5,001



12 Months EndedSupplemental Cash FlowData (Tables) Dec. 31, 2011

Supplemental Cash Flow Elements [Abstract]Cash paid for interest and income taxes, and significant non-cashinvesting and financing activities 2011 2010 2009

Cash Paid For:Interest $ 199 $ 190 $ 209Income taxes 349 357 308

Significant Non-CashInvesting and FinancingActivities:

Capital lease obligationsincurred

$ 58 $ 16 $ 7

Increase (decrease) inaccrued capitalexpenditures 55 51 (17)



3 Months Ended 4 MonthsEnded 12 Months EndedSelected Quarterly Financial

Data (Unaudited) (Details)(USD $)


specified

Sep. 03,2011

Jun.11,

2011

Mar.19,

2011

Sep.04,

2010

Jun.12,

2010

Mar.20,

2010

Dec.31,

2011

Dec.25,

2010Dec. 31, 2011 Dec. 25, 2010 Dec. 26, 2009

Revenues:Company sales $

2,854$2,431

$2,051

$2,496

$2,220

$1,996

$3,557

$3,071

$10,893

$9,783

$9,413

Franchise and license fees andincome 420 385 374 366 354 349 554 491 1,733 1,560 1,423

Total revenues 3,274 2,8162,425 2,8622,5742,345 4,111 3,562 12,626 11,343 10,836Restaurant profit 494 386 360 479 366 340 513 478 1,753 1,663Operating Profit 488 [1] 419 401 [1] 544 421 364 [2] 507 [1] 440 [2] 1,815 [1],[3],[4],[5],[6] 1,769 [2],[3],[5],[6] 1,590 [3],[4],[5],[7]

Net Income (Loss) 383 316 264 357 286 241 356 274 1,319 1,158 1,071Basic Earnings Per CommonShare (in dollars per share)

$0.82

$0.67

$0.56

$0.76

$0.61

$0.51

$0.77

$0.58 $ 2.81 $ 2.44 $ 2.28

Diluted Earnings Per CommonShare (in dollars per share)

$0.80

$0.65

$0.54

$0.74

$0.59

$0.50

$0.75

$0.56 $ 2.74 $ 2.38 $ 2.22

Dividends Declared PerCommon Share (in dollars pershare)

$0.00

$0.50

$0.00

$0.00

$0.21

$0.21

$0.57

$0.50 $ 1.07 $ 0.92 $ 0.80

Net loss primarily related toLJS and A&W divestitures (65)

Net loss primarily related torefranchising internationalmarkets

(88)

Net loss primarily related toU.S. business transformationmeasures and U.S.refranchising

(28)

Net Loss Related To U.S.Business TransformationMeasures And RefranchisingInternational Markets

(66) (19)

53rd Week ImpactRevenues:Total revenues 91Restaurant profit 15Operating Profit $ 25 $ 25[1] Includes net losses of $65 million primarily related to the LJS and A&W divestitures, $88 million primarily related to refranchising international

markets and $28 million primarily related to the U.S. business transformation measures and U.S. refranchising in the first, third and fourth quartersof 2011, respectively. See Note 4. The fourth quarter of 2011 also includes the $25 million impact of the 53rd week. See Note 2.

[2] Includes net losses of $66 million and $19 million in the first and fourth quarters of 2010, respectively, related primarily to the U.S. businesstransformation measures and refranchising international markets. See Note 4.

[3] 2011, 2010 and 2009 include approximately $21 million, $9 million and $16 million, respectively, of charges relating to U.S. general andadministrative productivity initiatives and realignment of resources. See Note 4.

[4] 2011 represents net losses resulting from the LJS and A&W divestitures. 2009 includes a $26 million charge to write-off goodwill associated withour LJS and A&W businesses in the U.S. See Note 9.

[5] Includes equity income from investments in unconsolidated affiliates of $47 million, $42 million and $36 million in 2011, 2010 and 2009,respectively, for China.

[6] 2011 and 2010 include depreciation reductions arising from the impairment of KFC restaurants we offered to sell of $10 million and $9 million,respectively. 2011 includes a depreciation reduction arising from the impairment of Pizza Hut UK restaurants we decided to sell in 2011 of $3million. See Note 4.

[7] 2009 includes a $68 million gain related to the acquisition of additional interest in and consolidation of a former unconsolidated affiliate in China.See Note 4.



Income Taxes (Details 4)(USD $)


Dec. 31, 2011

Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]Amount of unrecognized tax benefits that may decrease in the next 12 months $ 89Impact On Next Years' Effective Tax Rate [Member]Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]Amount of unrecognized tax benefits that may decrease in the next 12 months $ 39



3 Months Ended 4 MonthsEnded 12 Months EndedFranchise and License Fees

and Income (Details) (USD$)


Sep.03,

2011

Jun.11,

2011

Mar.19,

2011

Sep.04,

2010

Jun.12,

2010

Mar.20,

2010

Dec.31,

2011

Dec.25,

2010

Dec.31,

2011

Dec.25,

2010

Dec.26,

2009Franchise And License FeesAnd Income [Abstract]Initial fees, including renewalfees $ 68 $ 54 $ 57

Initial franchise fees includedin refranchising gains (21) (15) (17)

Initial fees, net 47 39 40Continuing fees and rentalincome 1,686 1,521 1,383

Franchise and license fees andincome $ 420 $ 385 $ 374 $ 366 $ 354 $ 349 $ 554 $ 491 $

1,733$1,560

$1,423



12 MonthsEnded

Contingencies (Details) (USD$)

In Millions, unless otherwisespecified Dec. 31, 2011

Guarantor Obligations [Line Items]Year longest lease expires 2151Property Lease Guarantee [Member]Guarantor Obligations [Line Items]Year longest lease expires 2065Potential amount of undiscounted payments we could be required to make in the event of non-payment 625

Present value of potential payments we could be required to make in the event of non-payment 550



12 Months Ended

Contingencies (Details 2)(USD $)

Dec. 31, 2011plaintiffs

restaurantsdays

HoursStates

violationscases

Loss Contingencies [Line Items]Number of cases concerning meals and rest breaks at Taco Bell in California Supreme Court 2Number of company-owned restaurants that may be in the class 220Minimum statutory damages per offense under Unruh Act $ 4,000Minimum statutory damages per offense under California Disabled Persons Act 1,000Number of individuals contended by plaintiffs that may be in the class 100,000Number of restaurants to be subject of trial on ADA claims 1Number of alleged violations of ADA and state law tried 12Number of states that assert state-law class action claims 16Number of hours worked per week after which overtime pay was allegedly not received 40Number of hours worked per day after which overtime pay was allegedly not received 12Number of days in which putative class members can elect to participate in the lawsuit 90Financial standby letter of credit | Franchise Loan Pool Guarantees [Member]Loss Contingencies [Line Items]Loss contingency, amount of guarantee 23,000,000Number of letters of credit provided 2Franchise Lending Program GuaranteesLoss Contingencies [Line Items]Loss contingency, amount of guarantee 17,000,000Total loans outstanding 32,000,000Guarantee of Indebtedness of OthersLoss Contingencies [Line Items]Outstanding guarantees of lines of credit and loans for unconsolidated affiliates 0Guarantee of Indebtedness of Others | Franchise Loan Pool Guarantees [Member]Loss Contingencies [Line Items]Loss contingency, amount of guarantee 14,000,000Total loans outstanding 63,000,000Additional amount under the franchisee loan pool available for lending 17,000,000Guarantee of Indebtedness of Others | Unconsolidated Affiliate GuaranteesLoss Contingencies [Line Items]Total revenues of unconsolidated affiliates 1,100,000,000Total assets of unconsolidated affiliates 525,000,000Total debt of unconsolidated affiliates $ 75,000,000



Income Taxes (Details 2)(USD $) Dec. 31, 2011 Dec. 25, 2010

Net deferred tax assets (liabilities) [Abstract]Operating loss and tax credit carryforwards $ 590,000,000 $ 335,000,000Employee benefits 259,000,000 171,000,000Share-based compensation 106,000,000 102,000,000Self-insured casualty claims 47,000,000 50,000,000Lease related liabilities 137,000,000 166,000,000Various liabilities 72,000,000 89,000,000Deferred income and other 49,000,000 97,000,000Gross deferred tax assets 1,260,000,000 1,010,000,000Deferred tax asset valuation allowances (368,000,000) (306,000,000)Net deferred tax assets 892,000,000 704,000,000Intangible assets, including goodwill (147,000,000) (211,000,000)Property, plant and equipment (92,000,000) (108,000,000)Other (53,000,000) (29,000,000)Gross deferred tax liabilities (292,000,000) (348,000,000)Net deferred tax assets (liabilities) 600,000,000 356,000,000Reported in Consolidated Balance Sheets as:Deferred income taxes - current 112,000,000 61,000,000Deferred income taxes - long-term 549,000,000 366,000,000Accounts payable and other current liabilities (16,000,000) (20,000,000)Other liabilities and deferred credits (45,000,000) (51,000,000)Net deferred tax assets (liabilities) 600,000,000 356,000,000Undistributed foreign earnings [Member]Deferred tax liability not recognized [Line Items]Cumulative amount of the temporary difference $ 1,700,000,000



12 Months EndedReportable OperatingSegments Dec. 31, 2011

Segment Reporting[Abstract]Reportable OperatingSegments

Reportable Operating Segments

We are principally engaged in developing, operating, franchising and licensing the worldwideKFC, Pizza Hut and Taco Bell concepts. KFC, Pizza Hut and Taco Bell operate in 115, 97,and 27 countries and territories, respectively. Our five largest international markets based onoperating profit in 2011 are China, Asia Franchise, Australia, Latin America Franchise, and UnitedKingdom.

We identify our operating segments based on management responsibility. The China Divisionincludes only mainland China and YRI includes the remainder of our international operations. Weconsider our KFC, Pizza Hut and Taco Bell operating segments in the U.S. to be similar andtherefore have aggregated them into a single reportable operating segment. Our U.S. and YRIsegment results also include the operating results of our LJS and A&W businesses while we ownedthose businesses.

Revenues2011 2010 2009


$ 12,626 $ 11,343 $ 10,836

Operating Profit; Interest Expense,Net; and

Income Before Income Taxes2011 2010 2009

China (c) $ 908 $ 755 $ 596YRI 673 589 497U.S. 589 668 647Unallocated Franchise and license fees and income(a)(b) — — (32)Unallocated Occupancy and other(b)(d) 14 9 —Unallocated and corporate expenses(b)(e) (223) (194) (189)Unallocated Closures and impairment expense(b)(f) (80) — (26)Unallocated Other income (expense)(b)(g) 6 5 71Unallocated Refranchising gain (loss)(b)(h) (72) (63) 26Operating Profit 1,815 1,769 1,590Interest expense, net (156) (175) (194)



China $ 257 $ 225 $ 184YRI 186 159 165



U.S. 177 201 216Corporate(d) 8 4 15

$ 628 $ 589 $ 580



$ 940 $ 796 $ 797



$ 8,834 $ 8,316 $ 7,148



$ 5,022 $ 4,964 $ 5,001

(a) Amount consists of reimbursements to KFC franchisees for installation costs of ovens forthe national launch of Kentucky Grilled Chicken. See Note 4.

(b) Amounts have not been allocated to the U.S., YRI or China Division segments forperformance reporting purposes.

(c) Includes equity income from investments in unconsolidated affiliates of $47 million, $42million and $36 million in 2011, 2010 and 2009, respectively, for China.

(d) 2011 and 2010 include depreciation reductions arising from the impairment of KFCrestaurants we offered to sell of $10 million and $9 million, respectively. 2011 includesa depreciation reduction arising from the impairment of Pizza Hut UK restaurants wedecided to sell in 2011 of $3 million. See Note 4.

(e) 2011, 2010 and 2009 include approximately $21 million, $9 million and $16 million,respectively, of charges relating to U.S. general and administrative productivity initiativesand realignment of resources. See Note 4.



(f) 2011 represents net losses resulting from the LJS and A&W divestitures. 2009 includes a$26 million charge to write-off goodwill associated with our LJS and A&W businesses inthe U.S. See Note 9.

(g) 2009 includes a $68 million gain related to the acquisition of additional interest in andconsolidation of a former unconsolidated affiliate in China. See Note 4.


(i) China includes investments in 4 unconsolidated affiliates totaling $167 million, $154million and $144 million, for 2011, 2010 and 2009, respectively.

(j) Primarily includes cash, deferred tax assets and property, plant and equipment, net, relatedto our office facilities.


See Note 4 for additional operating segment disclosures related to impairment and store closure(income) costs.



12 Months Ended 12 Months EndedSummary of SignificantAccounting Policies (Details)

(USD $)In Millions, unless otherwise

specified

Dec.31,

2011

Dec.25,

2010

Dec.26,

2009

Feb. 01, 2012Little Sheep GroupLimited [Member]

Dec. 26, 2009Affiliate in

Shanghai, China[Member]

Schedule of Equity Method Investments[Line Items]Future lease payments due fromfranchisees on a nominal basis $ 320

Additional percentage of ownershipacquired (in hundredths) 66.00%

Change in Cash and Cash Equivalents dueto consolidation of an entity in China $ 0 $ 0 $ 17 $ 17



12 Months EndedPension, Retiree Medical andRetiree Savings Plans

(Tables) Dec. 31, 2011

Compensation andRetirement Disclosure[Abstract]Funded status of pension plans The following chart summarizes the balance sheet impact, as well as benefit obligations, assets,

and funded status associated with our U.S. pension plans and significant International pensionplans. The actuarial valuations for all plans reflect measurement dates coinciding with our fiscalyear ends.


Plans2011 2010 2011 2010





Fair value of plan assets at beginning ofyear $ 907 $ 835 $ 164 $ 141

Actual return on plan assets 83 108 10 14Employer contributions 53 35 10 17Participant contributions — — 1 2Settlement payments — (9) — —Benefits paid (40) (57) (2) (4)Exchange rate changes — — — (6)Administrative expenses (5) (5) — —



Amounts recognized in theConsolidated Balance Sheet Amounts recognized in the Consolidated Balance Sheet:


Plans2011 2010 2011 2010

Accrued benefit asset - non-current $ — $ — $ 8 $ —



Accrued benefit liability – current (14) (10) — —Accrued benefit liability – non-current (369) (191) (12) (23)

$ (383) $ (201) $ (4) $ (23)

Amounts recognized as a lossin Accumulated OtherComprehensive Income

Amounts recognized as a loss in Accumulated Other Comprehensive Income:


Plans2011 2010 2011 2010

Actuarial net loss $ 540 $ 359 $ 30 $ 46Prior service cost 3 4 — —

$ 543 $ 363 $ 30 $ 46

Pension plans with anaccumulated benefit obligationin excess of pan assets

Information for pension plans with an accumulated benefit obligation in excess of plan assets:


Plans2011 2010 2011 2010

Projected benefit obligation $ 1,381 $ 1,108 $ — $ —Accumulated benefit obligation 1,327 1,057 — —Fair value of plan assets 998 907 — —

Pension plans with a projectedbenefit obligation in excess ofplan assets

Information for pension plans with a projected benefit obligation in excess of plan assets:


Plans2011 2010 2011 2010

Projected benefit obligation $ 1,381 $ 1,108 $ 99 $ 187Accumulated benefit obligation 1,327 1,057 87 155Fair value of plan assets 998 907 87 164

Components of net periodicbenefit cost


U.S. Pension Plans International Pension PlansNet periodic benefit cost 2011 2010 2009 2011 2010 2009Service cost $ 24 $ 25 $ 26 $ 5 $ 6 $ 5Interest cost 64 62 58 10 9 7Amortization of prior servicecost(a) 1 1 1 — — —Expected return on plan assets (71) (70) (59) (12) (9) (7)Amortization of net loss 31 23 13 2 2 2


Settlement(b) $ — $ 3 $ 2 $ — $ — $ —Special termination

benefits(c) $ 5 $ 1 $ 4 $ — $ — $ —

(a) Prior service costs are amortized on a straight-line basis over the average remainingservice period of employees expected to receive benefits.

(b) Settlement loss results from benefit payments from a non-funded plan exceeding the sumof the service cost and interest cost for that plan during the year.



(c) Special termination benefits primarily related to the U.S. business transformationmeasures taken in 2011, 2010 and 2009.

Pension losses in accumulatedother comprehensive income(loss)


U.S. Pension PlansInternationalPension Plans

2011 2010 2011 2010Beginning of year $ 363 $ 346 $ 46 $ 48Net actuarial (gain) loss 219 43 (5) 2Curtailment gain (7) (2) (10) —Amortization of net loss (31) (23) (2) (2)Amortization of prior service cost (1) (1) — —Exchange rate changes — — 1 (2)

End of year $ 543 $ 363 $ 30 $ 46

Weighted-average assumptionsused to determine benefitobligations and net periodicbenefit cost



2011 2010 2011 2010Discount rate 4.90% 5.90% 4.75% 5.40%Rate of compensation increase 3.75% 3.75% 3.85% 4.42%


2011 2010 2009 2011 2010 2009Discount rate 5.90% 6.30% 6.50% 5.40% 5.50% 5.51%Long-term rate of return on planassets 7.75% 7.75% 8.00% 6.64% 6.66% 7.20%Rate of compensation increase 3.75% 3.75% 3.75% 4.41% 4.42% 4.12%

Fair values of pension planassets

The fair values of our pension plan assets at December 31, 2011 by asset category and level withinthe fair value hierarchy are as follows:

U.S. PensionPlans

InternationalPensionPlans


Level 2:Cash Equivalents(a) 62 —Equity Securities – U.S. Large cap(b) 324 —Equity Securities – U.S. Mid cap(b) 54 —Equity Securities – U.S. Small cap(b) 54 —Equity Securities – Non-U.S.(b) 88 109Fixed Income Securities – U.S. Corporate(b) 263 —Fixed Income Securities – Non-U.S. Corporate(b) — 23Fixed Income Securities – U.S. Government and

Government Agencies(c) 164 —Fixed Income Securities – Other(b)(c) 39 11



Other Investments(b) — 40





(d) Excludes net payable of $51 million in the U.S. for purchases of assets included in theabove that were settled after year end

Expected benefit payments The benefits expected to be paid in each of the next five years and in the aggregate for the fiveyears thereafter are set forth below:

Year ended:

U.S.PensionPlans


2012 $ 68 $ 12013 50 12014 47 12015 50 12016 51 12017 - 2021 309 8



3 Months Ended 4 Months Ended 12 Months EndedReportable OperatingSegments (Details) (USD $)


Sep. 03,2011

Jun.11,

2011

Mar.19,

2011

Sep.04,

2010

Jun.12,

2010

Mar.20,

2010

Dec. 31,2011

Dec. 25,2010 Dec. 31, 2011 Dec. 25, 2010 Dec. 26, 2009

Segment ReportingInformation [Line Items]Total revenues $

3,274$2,816

$2,425

$2,862

$2,574

$2,345

$4,111

$3,562

$12,626

$11,343

$10,836

Franchise and license fees andincome 420 385 374 366 354 349 554 491 1,733 1,560 1,423

Operating Profit 488 [1] 419 401 [1] 544 421 364 [2] 507 [1] 440 [2] 1,815 [1],[3],[4],[5],[6] 1,769 [2],[3],[5],[6] 1,590 [3],[4],[5],[7]

Occupancy and otheroperating expenses 3,089 2,857 2,777

Closures and impairment(income) expenses 135 47 103

Other (income) expense (53) (43) (104)Refranchising (gain) loss 72 [8],[9] 63 [10],[11],[8] (26) [10]

Interest expense, net 156 175 194Income Before Income Taxes 1,659 [3],[4],[5],[6] 1,594 [3],[5],[6] 1,396 [3],[4],[5],[7]

Depreciation and amortization 628 [6] 589 [6] 580Capital Spending 940 796 797Identifiable Assets 8,834 [12] 8,316 [12] 8,834 [12] 8,316 [12] 7,148 [12]

Long Lived Assets 5,022 [13] 4,964 [13] 5,022 [13] 4,964 [13] 5,001 [13]

Equity income frominvestments in unconsolidatedaffiliates

47 42 36

Gain on consolidation of aformer unconsolidated affiliatein China

0 0 (68) [14]

Investments in unconsolidatedaffiliates 167 154 167 154

Affiliate in Shanghai, China[Member]Segment ReportingInformation [Line Items]Gain on consolidation of aformer unconsolidated affiliatein China

(68)

KFCSegment ReportingInformation [Line Items]Number of countries andterritories where each conceptoperates

115 115

KFC | Affiliate in Shanghai,China [Member]Segment ReportingInformation [Line Items]Gain on consolidation of aformer unconsolidated affiliatein China

(68)

Pizza HutSegment ReportingInformation [Line Items]Number of countries andterritories where each conceptoperates

97 97

Taco BellSegment ReportingInformation [Line Items]



Number of countries andterritories where each conceptoperates

27 27

ChinaSegment ReportingInformation [Line Items]Total revenues 5,566 4,135 3,407Operating Profit 908 [5] 755 [5] 596 [5]

Closures and impairment(income) expenses 12 16 9

Refranchising (gain) loss (14) (8) (3)Depreciation and amortization 257 225 184Capital Spending 405 272 271Identifiable Assets 2,527 [12] 2,289 [12] 2,527 [12] 2,289 [12] 1,632 [12]

Long Lived Assets 1,546 [13] 1,269 [13] 1,546 [13] 1,269 [13] 1,172 [13]

Equity income frominvestments in unconsolidatedaffiliates

47 42 36

Number of unconsolidatedaffiliates 4 4

Investments in unconsolidatedaffiliates 167 154 167 154 144

YRISegment ReportingInformation [Line Items]Total revenues 3,274 3,088 2,988Operating Profit 673 589 497Closures and impairment(income) expenses 22 14 22

Refranchising (gain) loss 69 [9] 53 [10],[11] 11 [10]

Depreciation and amortization 186 159 165Capital Spending 256 259 251Identifiable Assets 2,899 2,649 2,899 2,649 2,448Long Lived Assets 1,635 [13] 1,548 [13] 1,635 [13] 1,548 [13] 1,524 [13]

YRI | Pizza Hut | UKSegment ReportingInformation [Line Items]Depreciation reduction fromthe impairment of restaurantswe offered to sell

3

Goodwill impairment loss 0U.S.Segment ReportingInformation [Line Items]Total revenues 3,786 4,120 4,473Operating Profit 589 668 647Closures and impairment(income) expenses 21 17 46

Refranchising (gain) loss 17 [8] 18 [8] (34)Depreciation and amortization 177 201 216Capital Spending 256 241 270Identifiable Assets 2,070 2,398 2,070 2,398 2,575Long Lived Assets 1,805 [13] 2,095 [13] 1,805 [13] 2,095 [13] 2,260 [13]

Charges relating to U.S.general and administrativeproductivity initiatives andrealignment of resources

21 9 16

U.S. | KFCSegment ReportingInformation [Line Items]



Depreciation reduction fromthe impairment of restaurantswe offered to sell

10 9

U.S. | LJS and AWSegment ReportingInformation [Line Items]Goodwill impairment loss 26Unallocated Amount toSegment [Member]Segment ReportingInformation [Line Items]Franchise and license fees andincome 0 [15] 0 [15] (32) [15],[16]

Occupancy and otheroperating expenses (14) [15],[6] (9) [15],[6] 0 [15]

Corporate expenses 223 [15],[3] 194 [15],[3] 189 [15],[3]

Closures and impairment(income) expenses 80 [15],[4] 0 [15] 26 [15],[4]

Other (income) expense (6) [15] (5) [15] (71) [15],[7]

Refranchising (gain) loss 72 [15],[17] 63 [15],[17] (26) [15],[17]

Depreciation and amortization 8 [6] 4 [6] 15Capital Spending 23 24 5Identifiable Assets 1,338 [18] 980 [18] 1,338 [18] 980 [18] 493 [18]

Long Lived Assets $ 36 [13] $ 52 [13] $ 36 [13] $ 52 [13] $ 45 [13]

[1] Includes net losses of $65 million primarily related to the LJS and A&W divestitures, $88 million primarily related to refranchising internationalmarkets and $28 million primarily related to the U.S. business transformation measures and U.S. refranchising in the first, third and fourth quartersof 2011, respectively. See Note 4. The fourth quarter of 2011 also includes the $25 million impact of the 53rd week. See Note 2.







[8] U.S. refranchising losses in the years ended December 31, 2011 and December 25, 2010 are primarily due to losses on sales of and offers torefranchise KFCs in the U.S. There were approximately 250 and 600 KFC restaurants offered for refranchising as of December 31, 2011 andDecember 25, 2010, respectively. While we did not yet believe these KFCs met the criteria to be classified as held for sale, we did, consistent withour historical practice, review the restaurants for impairment as a result of our offer to refranchise. We recorded impairment charges where wedetermined that the carrying value of restaurant groups to be sold was not recoverable based upon our estimate of expected refranchising proceedsand holding period cash flows anticipated while we continue to operate the restaurants as company units. For those restaurant groups deemedimpaired, we wrote such restaurant groups down to our estimate of their fair values, which were based on the sales price we would expect to receivefrom a franchisee for each restaurant group. This fair value determination considered current market conditions, real-estate values, trends in theKFC U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurant groups to date. The non-cashimpairment charges that were recorded related to our offers to refranchise these company-operated KFC restaurants in the U.S. decreaseddepreciation expense versus what would have otherwise been recorded by $10 million and $9 million in the years ended December 31, 2011 andDecember 25, 2010, respectively. These depreciation reductions were not allocated to the U.S. segment resulting in depreciation expense in the U.S.segment results continuing to be recorded at the rate at which it was prior to the impairment charges being recorded for these restaurants. We willcontinue to review the restaurant groups for any further necessary impairment until the date they are sold. The aforementioned non-cash impairmentcharges do not include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cash write-down would be recorded, consistent with our historical policy, if the restaurant groups, or any subset of the restaurant groups, ultimately meet thecriteria to be classified as held for sale. We will also be required to record a charge for the fair value of our guarantee of future lease payments forleases we assign to the franchisee upon any sale.

[9] During the year ended December 31, 2011 we decided to refranchise or close all of our remaining Company-operated Pizza Hut restaurants in theUK market. While an asset group comprising approximately 350 dine-in restaurants did not meet the criteria for held-for-sale classification as ofDecember 31, 2011, ourdecision to sell was considered an impairment indicator. As such we reviewed this asset group for potential impairmentand determined that its carrying value was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash



flows anticipated while we continue to operate the restaurants as company units. Accordingly, we wrote this asset group down to our estimate of itsfair value, which is based on the sales price we would expect to receive from a buyer. This fair value determination considered current marketconditions, trends in the Pizza Hut UK business, and prices for similar transactions in the restaurant industry and resulted in a non-cash pre-taxwrite-down of $74 million which was recorded to Refranchising (gain) loss. This impairment charge decreased depreciation expense versus whatwould have otherwise been recorded by $3 million in 2011. This depreciation reduction was not allocated to the YRI segment, resulting indepreciation expense in the YRI segment results continuing to be recorded at the rate at which it was prior to the impairment charges being recordedfor these restaurants. We will continue to review the asset group for any further necessary impairment until the date it is sold. The write-down doesnot include any allocation of the Pizza Hut UK reporting unit goodwill in the asset group carrying value. This additional non-cash write-downwould be recorded, consistent with our historical policy, if the asset group ultimately meets the criteria to be classified as held for sale. Upon theultimate sale of the restaurants, depending on the form of the transaction, we could also be required to record a charge for the fair value of anyguarantee of future lease payments for any leases we assign to a franchisee and for the cumulative foreign currency translation adjustmentassociated with Pizza Hut UK. The decision to refranchise or close all remaining Pizza Hut restaurants in the UK was considered to be a goodwillimpairment indicator. We determined that the fair value of our Pizza Hut UK reporting unit exceeded its carrying value and as such there was noimpairment of the approximately $100 million in goodwill attributable to the reporting unit.

[10] During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as a result of our decision to offer to refranchiseour KFC Taiwan equity market. During the year ended December 25, 2010 we refranchised all of our remaining company restaurants in Taiwan,which consisted of 124 KFCs. We included in our December 25, 2010 financial statements a non-cash write-off of $7 million of goodwill indetermining the loss on refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit. The amount of goodwill write-offwas based on the relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fair value of thebusiness disposed of was determined by reference to the discounted value of the future cash flows expected to be generated by the restaurants andretained by the franchisee, which include a deduction for the anticipated royalties the franchisee will pay the Company associated with the franchiseagreement entered into in connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected, netcash flows to be derived from royalties from franchisees, including the royalties associated with the franchise agreement entered into in connectionwith this refranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchising aresubstantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after theaforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

[11] In the year ended December 25, 2010 we recorded a $52 million loss on the refranchising of our Mexico equity market as we sold all of ourCompany-owned restaurants, comprised of 222 KFCs and 123 Pizza Huts, to an existing Latin American franchise partner. The buyer is serving asthe master franchisee for Mexico which had 102 KFC and 53 Pizza Hut franchise restaurants at the time of the transaction. The write-off ofgoodwill included in this loss was minimal as our Mexico reporting unit included an insignificant amount of goodwill. This loss did not result inany related income tax benefit.

[12] China includes investments in 4 unconsolidated affiliates totaling $167 million, $154 million and $144 million, for 2011, 2010 and 2009,respectively.

[13] Includes property, plant and equipment, net, goodwill, and intangible assets, net.[14] See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in Shanghai, China.[15] Amounts have not been allocated to the U.S., YRI or China Division segments for performance reporting purposes.[16] Amount consists of reimbursements to KFC franchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken. See

Note 4.[17] See Note 4 for further discussion of Refranchising gain (loss).[18] Primarily includes cash, deferred tax assets and property, plant and equipment, net, related to our office facilities.



12 Months EndedGoodwill and IntangibleAssets (Tables) Dec. 31, 2011

Goodwill and IntangibleAssets Disclosure [Abstract]Changes in the carrying amountof goodwill







Goodwill, net $ 88 $ 282 $ 311 $ 681

(a) We recorded goodwill in our YRI segment related to the July 1, 2010 exercise of ouroption with our Russian partner to purchase their interest in the co-branded Rostik’s-KFC restaurants across Russia and the Commonwealth of Independent States. See Note4.

(b) Disposals and other, net includes the impact of foreign currency translation on existingbalances and goodwill write-offs associated with refranchising.

(c) We recorded goodwill in our YRI segment related to the acquisition of 68 stores in SouthAfrica. See Note 4.

(d) As a result of the LJS and A&W divestitures in 2011, we disposed of $26 million ofgoodwill that was fully impaired in 2009.

Schedule Of Finite AndIndefinite Lived IntangibleAssets By Major Class [TextBlock]


2011 2010



GrossCarryingAmount


Definite-lived intangibleassets

Franchise contract rights $ 130 $ (77) $ 163 $ (83)Trademarks/brands 28 (12) 234 (57)



Lease tenancy rights 58 (12) 56 (12)Favorable operating leases 29 (13) 27 (10)Reacquired franchise rights 167 (33) 143 (20)Other 5 (2) 5 (2)

$ 417 $ (149) $ 628 $ (184)

Indefinite-lived intangibleassets

Trademarks/brands $ 31 $ 31



12 Months EndedSummary of SignificantAccounting Policies (Details

3) (USD $)In Millions, unless otherwise

specified

Dec. 31,2011

restaurants

Dec.25,

2010

Dec.26,

2009

Direct Marketing Costs [Abstract]Advertising expenses $ 593 $

557$548

Research and Development Expenses [Abstract]Research and development expenses 34 33 31Impairment or Disposal of Property, Plant and Equipment [Abstract]Number of consecutive years of operating losses used as primary indicator of potentialimpairment for our semi-annual impairment testing of restaurant assets 2 years

Number of years within which a sale is probable to classify a restaurant as held for saleand suspend depreciation and amortization 1 year

Impairment of Investments in Unconsolidated Affiliates [Abstract]Number of consecutive years of operating losses used as indicator of impairment ofinvestments in unconsolidated affiliates 2 years

Recorded impairment associated with unconsolidated affiliates 0 0 0Income Taxes [Abstract]Percentage threshold that the positions taken or expected to be taken is more likely thannot sustained upon examination by tax authorities (in hundredths) 50.00%

Receivables [Abstract]Number of days from the period in which the corresponding sales occur that tradereceivables are generally due 30 days

Net provisions for uncollectible franchise and license trade receivables included inFranchise and license expenses 7 3 11

Accounts and notes receivable [Abstract]Accounts and notes receivable 308 289Allowance for doubtful accounts (22) (33)Accounts and notes receivable, net 286 256Number of years notes receivable and direct financing leases are due within and would beincluded in accounts and notes receivable 1 year

Number of years notes receivable and direct financing leases are beyond and would beincluded in other assets 1 year

Net amounts included in Other Assets 15 57Allowance for doubtful accounts related to notes and direct financing lease receivables $ 4 $ 30Leases and Leasehold Improvements [Abstract]Approximate number of restaurants operated on leased land and/or buildings 6,200Goodwill and Intangible Assets [Abstract]Number of years from acquisition that goodwill is written off in its entirety, if a Companyrestaurant is sold within this period 2 years

Minimum number of years from acquisition that a company restaurant is sold, after whichwe include goodwill in the carrying amount of the restaurants disposed of based on the 2 years



relative fair values of the portion of the reporting unit disposed of in the refranchising andthe portion of the reporting unit that will be retainedBuildings and improvementsProperty, Plant and Equipment [Line Items]Minimum estimated useful life used in the calculation of the depreciation andamortization on a straight-line basis (in years) 5

Maximum estimated useful life used in the calculation of the depreciation andamortization on a straight-line basis (in years) 25

Machinery and equipmentProperty, Plant and Equipment [Line Items]Minimum estimated useful life used in the calculation of the depreciation andamortization on a straight-line basis (in years) 3


Capitalized software costsProperty, Plant and Equipment [Line Items]Minimum estimated useful life used in the calculation of the depreciation andamortization on a straight-line basis (in years) 3




12 Months EndedPension, Retiree Medical andRetiree Savings Plans

(Details) (USD $)In Millions, unless otherwise

specified

Dec. 31, 2011 Dec. 25,2010

Dec. 26,2009

Amounts recognized as a loss in Accumulated Other ComprehensiveIncome:Accumulated benefit obligation $ 1,496 $

1,212Assumed health care cost trend rates [Abstract]Year that rate reaches ultimate trend rate 2028Effect of one-percentage point change in assumed health care cost trendrates [Abstract]Maximum 401(k) participant contribution of eligible compensation 75.00%Company match of participant contribution up to 6% of eligible compensation 100.00%Maximum company match of participant contribution of eligible compensation 6.00%Defined Contribution Plan, Cost Recognized 14 15 16U.S. Pension Plans [Member]Change in benefit obligationBenefit obligation at beginning of year 1,108 1,010Service cost 24 25 26Interest cost 64 62 58Participant contributions 0 0Curtailment gain (7) (2)Settlement loss 0 (1)Special termination benefits 5 [1] 1 [1] 4 [1]

Exchange rate changes 0 0Benefits paid (40) (57)Settlement payments 0 (9)Actuarial (gain) loss 227 77Benefit obligation at end of year 1,381 1,108 1,010Change in plan assetsFair value of plan assets at beginning of year 907 835Actual return on plan assets 83 108Employer contributions 53 35Participant contributions 0 0Settlement payments 0 (9)Benefits paid (40) (57)Exchange rate changes 0 0Administrative expenses (5) (5)Fair value of plan assets at end of year 998 907 835Funded status at end of year (383) (201)Amounts recognized in the Consolidated Balance Sheet:Accrued benefit asset - non-current 0 0



Accrued benefit liability - current (14) (10)Accrued benefit liability - non-current (369) (191)Accrued benefit amounts recognized (383) (201)Amounts recognized as a loss in Accumulated Other ComprehensiveIncome:Actuarial net loss 540 359Prior service cost 3 4Amounts recognized as a loss in Accumulated Other Comprehensive Income 543 363 346Information for pension plans with an accumulated benefit obligation inexcess of plan assets:Projected benefit obligation 1,381 1,108Accumulated benefit obligation 1,327 1,057Fair value of plan assets 998 907Information for pension plans with a projected benefit obligation in excessof plan assets:Projected benefit obligation 1,381 1,108Accumulated benefit obligation 1,327 1,057Fair value of plan assets 998 907Discretionary funding contributions in next year 30Components of net periodic benefit cost:Service cost 24 25 26Interest cost 64 62 58Amortization of prior service cost 1 [2] 1 [2] 1 [2]

Expected return on plan assets (71) (70) (59)Amortization of net loss 31 23 13Net periodic benefit cost 49 41 39Additional loss recognized due to:Settlement 0 [3] 3 [3] 2 [3]

Special termination benefits 5 [1] 1 [1] 4 [1]

Pension losses in accumulated other comprehensive income (loss):Beginning of year 363 346Net actuarial (gain) loss 219 43Curtailment gain (7) (2)Amortization of net loss (31) (23)Amortization of prior service cost (1) (1)Exchange rate changes 0 0End of year 543 363 346Amounts that will be amortized from accumulated other comprehensiveloss in next fiscal year [Abstract]Estimated net loss that will be amortized from accumulated othercomprehensive loss into net periodic pension cost next year 63

Estimated prior service cost that will be amortized from accumulated othercomprehensive loss into net periodic pension cost next year 1



Weighted-average assumptions used to determine benefit obligations atthe measurement dates:Discount rate (in hundredths) 4.90% 5.90%Rate of compensation increase (in hundredths) 3.75% 3.75%Weighted-average assumptions used to determine the net periodic benefitcost for fiscal years:Discount rate (in hundredths) 5.90% 6.30% 6.50%Long-term rate return on plan assets (in hundredths) 7.75% 7.75% 8.00%Rate of compensation increase (in hundredths) 3.75% 3.75% 3.75%Plan Assets [Abstract]Percentage of total pension plan assets composed of investments (inhundredths) 85.00%

Equity securities, target allocation (in hundredths) 55.00%Fixed income securities, target allocation (in hundredths) 45.00%Value of mutual fund held as an investment that includes YUM stock 0.7 0.6Approximate percentage of total plan assets in investment that includes YUMstock (in hundredths) 1.00%

Net payable for unsettled transactions 51Benefit Payments [Abstract]2012 682013 502014 472015 502016 512017 - 2021 309U.S. Pension Plans [Member] | Level 1 [Member] | Cash [Member]Change in plan assetsFair value of plan assets at end of year 1 [4]

U.S. Pension Plans [Member] | Level 2 [Member] | Cash Equivalents[Member]Change in plan assetsFair value of plan assets at end of year 62 [4]

U.S. Pension Plans [Member] | Level 2 [Member] | Equity Securities - U.S.Large cap [Member]Change in plan assetsFair value of plan assets at end of year 324 [5]

U.S. Pension Plans [Member] | Level 2 [Member] | Equity Securities - U.S.Mid cap [Member]Change in plan assetsFair value of plan assets at end of year 54 [5]

U.S. Pension Plans [Member] | Level 2 [Member] | Equity Securities - U.S.Small cap [Member]Change in plan assetsFair value of plan assets at end of year 54 [5]



U.S. Pension Plans [Member] | Level 2 [Member] | Equity Securities - Non-U.S. [Member]Change in plan assetsFair value of plan assets at end of year 88 [5]

U.S. Pension Plans [Member] | Level 2 [Member] | Fixed Income Securities -U.S. Corporate [Member]Change in plan assetsFair value of plan assets at end of year 263 [5]

U.S. Pension Plans [Member] | Level 2 [Member] | Fixed Income Securities -Non-U.S. Corporate [Member]Change in plan assetsFair value of plan assets at end of year 0 [5]

U.S. Pension Plans [Member] | Level 2 [Member] | Fixed Income Securities -U.S. Government and Government Agencies [Member]Change in plan assetsFair value of plan assets at end of year 164 [6]

U.S. Pension Plans [Member] | Level 2 [Member] | Fixed Income Securities -Non-U.S. Government [Member]Change in plan assetsFair value of plan assets at end of year 39 [5],[6]

U.S. Pension Plans [Member] | Level 2 [Member] | Alternative Investments[Member]Change in plan assetsFair value of plan assets at end of year 0 [5]

U.S. Pension Plans [Member] | Amount settled prior to year end [Member]Change in plan assetsFair value of plan assets at end of year 1,049 [7]

International Pension Plans [Member]Change in benefit obligationBenefit obligation at beginning of year 187 176Service cost 5 6 5Interest cost 10 9 7Participant contributions 1 2Curtailment gain (10) 0Settlement loss 0 0Special termination benefits 0 0 0Exchange rate changes 1 (9)Benefits paid (2) (4)Settlement payments 0 0Actuarial (gain) loss (5) 7Benefit obligation at end of year 187 187 176Change in plan assetsFair value of plan assets at beginning of year 164 141



Actual return on plan assets 10 14Employer contributions 10 17Participant contributions 1 2Settlement payments 0 0Benefits paid (2) (4)Exchange rate changes 0 (6)Administrative expenses 0 0Fair value of plan assets at end of year 183 164 141Funded status at end of year (4) (23)Amounts recognized in the Consolidated Balance Sheet:Accrued benefit asset - non-current 8 0Accrued benefit liability - current 0 0Accrued benefit liability - non-current (12) (23)Accrued benefit amounts recognized (4) (23)Amounts recognized as a loss in Accumulated Other ComprehensiveIncome:Actuarial net loss 30 46Prior service cost 0 0Amounts recognized as a loss in Accumulated Other Comprehensive Income 30 46 48Information for pension plans with an accumulated benefit obligation inexcess of plan assets:Projected benefit obligation 0 0Accumulated benefit obligation 0 0Fair value of plan assets 0 0Information for pension plans with a projected benefit obligation in excessof plan assets:Projected benefit obligation 99 187Accumulated benefit obligation 87 155Fair value of plan assets 87 164Discretionary funding contributions in next year 0Components of net periodic benefit cost:Service cost 5 6 5Interest cost 10 9 7Amortization of prior service cost 0 [2] 0 [2] 0 [2]

Expected return on plan assets (12) (9) (7)Amortization of net loss 2 2 2Net periodic benefit cost 5 8 7Additional loss recognized due to:Settlement 0 [3] 0 [3] 0 [3]

Special termination benefits 0 0 0Pension losses in accumulated other comprehensive income (loss):Beginning of year 46 48Net actuarial (gain) loss (5) 2Curtailment gain (10) 0



Amortization of net loss (2) (2)Amortization of prior service cost 0 0Exchange rate changes 1 (2)End of year 30 46 48Amounts that will be amortized from accumulated other comprehensiveloss in next fiscal year [Abstract]Estimated net loss that will be amortized from accumulated othercomprehensive loss into net periodic pension cost next year 1

Weighted-average assumptions used to determine benefit obligations atthe measurement dates:Discount rate (in hundredths) 4.75% 5.40%Rate of compensation increase (in hundredths) 3.85% 4.42%Weighted-average assumptions used to determine the net periodic benefitcost for fiscal years:Discount rate (in hundredths) 5.40% 5.50% 5.51%Long-term rate return on plan assets (in hundredths) 6.64% 6.66% 7.20%Rate of compensation increase (in hundredths) 4.41% 4.42% 4.12%Benefit Payments [Abstract]2012 12013 12014 12015 12016 12017 - 2021 8International Pension Plans [Member] | Level 1 [Member] | Cash [Member]Change in plan assetsFair value of plan assets at end of year 0 [4]

International Pension Plans [Member] | Level 2 [Member] | Cash Equivalents[Member]Change in plan assetsFair value of plan assets at end of year 0 [4]

International Pension Plans [Member] | Level 2 [Member] | Equity Securities -U.S. Large cap [Member]Change in plan assetsFair value of plan assets at end of year 0 [5]

International Pension Plans [Member] | Level 2 [Member] | Equity Securities -U.S. Mid cap [Member]Change in plan assetsFair value of plan assets at end of year 0 [5]

International Pension Plans [Member] | Level 2 [Member] | Equity Securities -U.S. Small cap [Member]Change in plan assetsFair value of plan assets at end of year 0 [5]



International Pension Plans [Member] | Level 2 [Member] | Equity Securities -Non-U.S. [Member]Change in plan assetsFair value of plan assets at end of year 109 [5]

International Pension Plans [Member] | Level 2 [Member] | Fixed IncomeSecurities - U.S. Corporate [Member]Change in plan assetsFair value of plan assets at end of year 0 [5]

International Pension Plans [Member] | Level 2 [Member] | Fixed IncomeSecurities - Non-U.S. Corporate [Member]Change in plan assetsFair value of plan assets at end of year 23 [5]

International Pension Plans [Member] | Level 2 [Member] | Fixed IncomeSecurities - U.S. Government and Government Agencies [Member]Change in plan assetsFair value of plan assets at end of year 0 [6]

International Pension Plans [Member] | Level 2 [Member] | Fixed IncomeSecurities - Non-U.S. Government [Member]Change in plan assetsFair value of plan assets at end of year 11 [5],[6]

International Pension Plans [Member] | Level 2 [Member] | AlternativeInvestments [Member]Change in plan assetsFair value of plan assets at end of year 40 [5]

International Pension Plans [Member] | Amount settled prior to year end[Member]Change in plan assetsFair value of plan assets at end of year 183Post-retirement Plan [Member]Change in benefit obligationSpecial termination benefits 1Amounts recognized as a loss in Accumulated Other ComprehensiveIncome:Actuarial net loss (12) (6)Accumulated benefit obligation 86 78Components of net periodic benefit cost:Net periodic benefit cost 6 6 7Additional loss recognized due to:Special termination benefits 1Benefit Payments [Abstract]2012 72013 72014 72015 7



2016 72017 - 2021 29Assumed health care cost trend rates [Abstract]Assumed health care cost trend rate (in hundredths) 7.50% 7.70%Ultimate trend rate (in hundredths) 4.50%Effect of one-percentage point change in assumed health care cost trendrates [Abstract]One percentage-point increase in assumed health care cost trend rates,maximum impact to service and interest cost 1

One percentage-point decrease in assumed health care cost trend rates,maximum impact to service and interest cost 1

One percentage-point increase in assumed health care cost trend rates,maximum impact to post-retirement benefit obligation 1

One percentage-point decrease in assumed health care cost trend rates,maximum impact to post-retirement benefit obligation 1

Accumulated Other Comprehensive Income (Loss) [Member] | UK PensionPlans [Member]Defined Benefit Plan Disclosure [Line Items]Recognized net gain (loss) due to curtailment $ 10[1] Special termination benefits primarily related to the U.S. business transformation measures taken in 2011,

2010 and 2009.[2] Prior service costs are amortized on a straight-line basis over the average remaining service period of

employees expected to receive benefits.[3] Settlement loss results from benefit payments from a non-funded plan exceeding the sum of the service cost

and interest cost for that plan during the year.[4] Short-term investments in money market funds[5] Securities held in common trusts[6] Investments held by the Plan are directly held[7] Excludes net payable of $51 million in the U.S. for purchases of assets included in the above that were

settled after year end



12 Months EndedGoodwill and IntangibleAssets (Details 2) (USD $)


Dec. 31,2011

Dec. 25,2010

Dec. 26,2009

Definite-lived intangible assetsGross Carrying Amount $ 417 $ 628Accumulated Amortization (149) (184)Definite-lived intangible assets, amortization expense 31 29 25Approximate amortization expense for definite-lived intangible assets - 2012 21Approximate amortization expense for definite-lived intangible assets - 2013 19Approximate amortization expense for definite-lived intangible assets - 2014 17Approximate amortization expense for definite-lived intangible assets - 2015 16Approximate amortization expense for definite-lived intangible assets - 2016 16Trademarks/brands [Member]Indefinite-lived intangible assetsGross Carrying Amount 31 31Trademarks/brands [Member] | LJS and AWDefinite-lived intangible assetsNet definite-lived intangible assets written off related to divestiture of LJS andA&W 164

Finite-lived intangible assets, accumulated amortization written off related todivestiture of LJS and A&W 48

Finite-lived intangible assets, future amortization expense, reduction due todivestiture of LJS and A&W 8

Franchise contract rights [Member]Definite-lived intangible assetsGross Carrying Amount 130 163Accumulated Amortization (77) (83)Trademarks/brands [Member]Definite-lived intangible assetsGross Carrying Amount 28 234Accumulated Amortization (12) (57)Lease tenancy rights [Member]Definite-lived intangible assetsGross Carrying Amount 58 56Accumulated Amortization (12) (12)Favorable operating leases [Member]Definite-lived intangible assetsGross Carrying Amount 29 27Accumulated Amortization (13) (10)Reacquired franchise rights [Member]Definite-lived intangible assetsGross Carrying Amount 167 143Accumulated Amortization (33) (20)



Other [Member]Definite-lived intangible assetsGross Carrying Amount 5 5Accumulated Amortization $ (2) $ (2)



12 Months EndedContingencies (Tables) Dec. 31, 2011Commitments and ContingenciesDisclosure [Abstract]Activity related to self-insuredproperty and casualty reserves

The following table summarizes the 2011 and 2010 activity related to our self-insuredproperty and casualty reserves as of December 31, 2011.


EndingBalance




12 Months EndedSummary of SignificantAccounting Policies Dec. 31, 2011

Accounting Policies[Abstract]Summary of SignificantAccounting Policies

Summary of Significant Accounting Policies

Our preparation of the accompanying Consolidated Financial Statements in conformity withGenerally Accepted Accounting Principles in the United States of America (“GAAP”) requires usto make estimates and assumptions that affect reported amounts of assets and liabilities, disclosureof contingent assets and liabilities at the date of the financial statements, and the reported amountsof revenues and expenses during the reporting period. Actual results could differ from theseestimates. The Company evaluated subsequent events through the date the Consolidated FinancialStatements were issued and filed with the Securities and Exchange Commission.

Principles of Consolidation and Basis of Preparation. Intercompany accounts and transactionshave been eliminated in consolidation. We consolidate entities in which we have a controllingfinancial interest, the usual condition of which is ownership of a majority voting interest. Wealso consider for consolidation an entity, in which we have certain interests, where the controllingfinancial interest may be achieved through arrangements that do not involve voting interests. Suchan entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primarybeneficiary. The primary beneficiary is the entity that possesses the power to direct the activitiesof the VIE that most significantly impact its economic performance and has the obligation toabsorb losses or the right to receive benefits from the VIE that are significant to it.

Our most significant variable interests are in entities that operate restaurants under our Concepts’franchise and license arrangements. We do not generally have an equity interest in our franchiseeor licensee businesses with the exception of certain entities in China as discussedbelow. Additionally, we do not typically provide significant financial support such as loans orguarantees to our franchisees and licensees. However, we do have variable interests in certainfranchisees through real estate lease arrangements with them to which we are a party. At theend of 2011, YUM has future lease payments due from franchisees, on a nominal basis, ofapproximately $320 million. As our franchise and license arrangements provide our franchiseeand licensee entities the power to direct the activities that most significantly impact their economicperformance, we do not consider ourselves the primary beneficiary of any such entity that mightotherwise be considered a VIE.

See Note 19 for additional information on an entity that operates a franchise lending program thatis a VIE in which we have a variable interest but for which we are not the primary beneficiary andthus do not consolidate.

Certain investments in entities that operate KFCs in China as well as our investment in Little SheepGroup Limited ("Little Sheep"), a Chinese casual dining concept headquartered in Inner Mongolia,China, are accounted for by the equity method. These entities are not VIEs and our lack ofmajority voting rights precludes us from controlling these affiliates. Thus, we do not consolidatethese affiliates, instead accounting for them under the equity method. Our share of the net incomeor loss of those unconsolidated affiliates is included in Other (income) expense. Subsequent tofiscal year 2011, we acquired an additional 66% interest in Little Sheep. As a result, we will beginconsolidating this business in 2012. In the second quarter of 2009 we began consolidating theentity that operates the KFCs in Shanghai, China, which was previously accounted for using theequity method. The increase in cash related to the consolidation of this entitiy's cash balance of$17 million is presented as a single line item on our 2009 Consolidated Statement of Cash Flows.

We report Net income attributable to the non-controlling interest in the entity that operates theKFCs in Beijing, China and since its consolidation, the Shanghai entity, separately on the face ofour Consolidated Statements of Income. The portion of equity in these entities not attributable to



the Company is reported within equity, separately from the Company’s equity on the ConsolidatedBalance Sheets.

See Note 4 for a further description of the accounting upon acquisition of additional interest in theShanghai entity.

We participate in various advertising cooperatives with our franchisees and licensees establishedto collect and administer funds contributed for use in advertising and promotional programsdesigned to increase sales and enhance the reputation of the Company and its franchise owners.Contributions to the advertising cooperatives are required for both Company-operated andfranchise restaurants and are generally based on a percent of restaurant sales. We maintain certainvariable interests in these cooperatives. As the cooperatives are required to spend all fundscollected on advertising and promotional programs, total equity at risk is not sufficient to permitthe cooperatives to finance their activities without additional subordinated financial support.Therefore, these cooperatives are VIEs. As a result of our voting rights, we consolidate certain ofthese cooperatives for which we are the primary beneficiary. The Advertising cooperatives assets,consisting primarily of cash received from the Company and franchisees and accounts receivablefrom franchisees, can only be used to settle obligations of the respective cooperative. TheAdvertising cooperative liabilities represent the corresponding obligation arising from the receiptof the contributions to purchase advertising and promotional programs for which creditors do nothave recourse to the general credit of the primary beneficiary. Therefore, we report all assetsand liabilities of these advertising cooperatives that we consolidate as Advertising cooperativeassets, restricted and Advertising cooperative liabilities in the Consolidated Balance Sheet. Asthe contributions to these cooperatives are designated and segregated for advertising, we act asan agent for the franchisees and licensees with regard to these contributions. Thus, we do notreflect franchisee and licensee contributions to these cooperatives in our Consolidated Statementsof Income or Consolidated Statements of Cash Flows.

Fiscal Year. Our fiscal year ends on the last Saturday in December and, as a result, a 53rd weekis added every five or six years. The first three quarters of each fiscal year consist of 12 weeksand the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscalyears with 53 weeks. Our subsidiaries operate on similar fiscal calendars except that China andcertain other international subsidiaries operate on a monthly calendar, and thus never have a 53rdweek, with two months in the first quarter, three months in the second and third quarters and fourmonths in the fourth quarter. All of our international businesses except China close one period orone month earlier to facilitate consolidated reporting.

Fiscal year 2011 included 53 weeks for our U.S. businesses and a portion of our YRI business. The53rd week added $91 million to total revenues, $15 million to Restaurant profit and $25 million toOperating Profit in our 2011 Consolidated Statement of Income. The $25 million benefit was offsetthroughout 2011 by investments, including franchise development incentives, as well as higher-than-normal spending, such as restaurant closures in the U.S. and YRI.

Foreign Currency. The functional currency determination for operations outside the U.S. isbased upon a number of economic factors, including but not limited to cash flows and financingtransactions. Income and expense accounts are translated into U.S. dollars at the average exchangerates prevailing during the period. Assets and liabilities are translated into U.S. dollars at exchangerates in effect at the balance sheet date. Resulting translation adjustments are recorded inAccumulated other comprehensive income (loss) in the Consolidated Balance Sheet and aresubsequently recognized as income or expense only upon sale or upon complete or substantiallycomplete liquidation of the related investment in a foreign entity. Gains and losses arising fromthe impact of foreign currency exchange rate fluctuations on transactions in foreign currency areincluded in Other (income) expense in our Consolidated Statement of Income.

Reclassifications. We have reclassified certain items in the Consolidated Financial Statements forprior periods to be comparable with the classification for the fiscal year ended December 31, 2011.These reclassifications had no effect on previously reported Net Income - YUM! Brands, Inc.



Franchise and License Operations. We execute franchise or license agreements for each unitoperated by third parties which set out the terms of our arrangement with the franchisee orlicensee. Our franchise and license agreements typically require the franchisee or licensee to payan initial, non-refundable fee and continuing fees based upon a percentage of sales. Subject toour approval and their payment of a renewal fee, a franchisee may generally renew the franchiseagreement upon its expiration.

The internal costs we incur to provide support services to our franchisees and licensees arecharged to General and Administrative (“G&A”) expenses as incurred. Certain direct costs ofour franchise and license operations are charged to franchise and license expenses. These costsinclude provisions for estimated uncollectible fees, rent or depreciation expense associated withrestaurants we lease or sublease to franchisees, franchise and license marketing funding,amortization expense for franchise-related intangible assets and certain other direct incrementalfranchise and license support costs.

Revenue Recognition. Revenues from Company-operated restaurants are recognized whenpayment is tendered at the time of sale. The Company presents sales net of sales-relatedtaxes. Income from our franchisees and licensees includes initial fees, continuing fees, renewalfees and rental income from restaurants we lease or sublease to them. We recognize initial feesreceived from a franchisee or licensee as revenue when we have performed substantially all initialservices required by the franchise or license agreement, which is generally upon the opening of astore. We recognize continuing fees based upon a percentage of franchisee and licensee sales andrental income as earned. We recognize renewal fees when a renewal agreement with a franchiseeor licensee becomes effective. We present initial fees collected upon the sale of a restaurant to afranchisee in Refranchising (gain) loss.

Direct Marketing Costs. We charge direct marketing costs to expense ratably in relation torevenues over the year in which incurred and, in the case of advertising production costs, in theyear the advertisement is first shown. Deferred direct marketing costs, which are classified asprepaid expenses, consist of media and related advertising production costs which will generallybe used for the first time in the next fiscal year and have historically not been significant. To theextent we participate in advertising cooperatives, we expense our contributions as incurred whichare generally based on a percentage of sales. Our advertising expenses were $593 million, $557million and $548 million in 2011, 2010 and 2009, respectively. We report substantially all of ourdirect marketing costs in Occupancy and other operating expenses.

Research and Development Expenses. Research and development expenses, which we expenseas incurred, are reported in G&A expenses. Research and development expenses were $34million, $33 million and $31 million in 2011, 2010 and 2009, respectively.

Share-Based Employee Compensation. We recognize all share-based payments to employees,including grants of employee stock options and stock appreciation rights (“SARs”), in theConsolidated Financial Statements as compensation cost over the service period based on theirfair value on the date of grant. This compensation cost is recognized over the service period ona straight-line basis for the fair value of awards that actually vest. We present this compensationcost consistent with the other compensation costs for the employee recipient in either Payroll andemployee benefits or G&A expenses.

Legal Costs. Settlement costs are accrued when they are deemed probable and estimable.Anticipated legal fees related to self-insured workers' compensation, employment practicesliability, general liability, automobile liability, product liability and property losses (collectively,"property and casualty losses") are accrued when deemed probable and estimable. Legal fees notrelated to self-insured property and casualty losses are recognized as incurred.

Impairment or Disposal of Property, Plant and Equipment. Property, plant and equipment(“PP&E”) is tested for impairment whenever events or changes in circumstances indicate that thecarrying value of the assets may not be recoverable. The assets are not recoverable if their carryingvalue is less than the undiscounted cash flows we expect to generate from such assets. If the assets



are not deemed to be recoverable, impairment is measured based on the excess of their carryingvalue over their fair value.

For purposes of impairment testing for our restaurants, we have concluded that an individualrestaurant is the lowest level of independent cash flows unless our intent is to refranchiserestaurants as a group. We review our long-lived assets of such individual restaurants (primarilyPP&E and allocated intangible assets subject to amortization) semi-annually for impairment, orwhenever events or changes in circumstances indicate that the carrying amount of a restaurant maynot be recoverable. We use two consecutive years of operating losses as our primary indicatorof potential impairment for our semi-annual impairment testing of these restaurant assets. Weevaluate the recoverability of these restaurant assets by comparing the estimated undiscountedfuture cash flows, which are based on our entity-specific assumptions, to the carrying valueof such assets. For restaurant assets that are not deemed to be recoverable, we write-down animpaired restaurant to its estimated fair value, which becomes its new cost basis. Fair valueis an estimate of the price a franchisee would pay for the restaurant and its related assetsand is determined by discounting the estimated future after-tax cash flows of the restaurant,which include a deduction for the royalty the franchisee would pay us. The after-tax cash flowsincorporate reasonable assumptions we believe a franchisee would make such as sales growthand margin improvement. The discount rate used in the fair value calculation is our estimate ofthe required rate of return that a franchisee would expect to receive when purchasing a similarrestaurant and the related long-lived assets. The discount rate incorporates rates of returns forhistorical refranchising market transactions and is commensurate with the risks and uncertaintyinherent in the forecasted cash flows.

In executing our refranchising initiatives, we most often offer groups of restaurants for sale. Whenwe believe a restaurant or groups of restaurants will be refranchised for a price less than theircarrying value, but do not believe the restaurant(s) have met the criteria to be classified as held forsale, we review the restaurants for impairment. We evaluate the recoverability of these restaurantassets at the date it is considered more likely than not that they will be refranchised by comparingestimated sales proceeds plus holding period cash flows, if any, to the carrying value of therestaurant or group of restaurants. For restaurant assets that are not deemed to be recoverable,we recognize impairment for any excess of carrying value over the fair value of the restaurants,which is based on the expected net sales proceeds. To the extent ongoing agreements to be enteredinto with the franchisee simultaneous with the refranchising are expected to contain terms, such asroyalty rates, not at prevailing market rates, we consider the off-market terms in our impairmentevaluation. We recognize any such impairment charges in Refranchising (gain) loss. We classifyrestaurants as held for sale and suspend depreciation and amortization when (a) we make a decisionto refranchise; (b) the restaurants can be immediately removed from operations; (c) we have begunan active program to locate a buyer; (d) the restaurant is being actively marketed at a reasonablemarket price; (e) significant changes to the plan of sale are not likely; and (f) the sale is probablewithin one year. Restaurants classified as held for sale are recorded at the lower of their carryingvalue or fair value less cost to sell. We recognize estimated losses on restaurants that are classifiedas held for sale in Refranchising (gain) loss.

Refranchising (gain) loss includes the gains or losses from the sales of our restaurants to newand existing franchisees, including impairment charges discussed above, and the related initialfranchise fees. We recognize gains on restaurant refranchisings when the sale transaction closes,the franchisee has a minimum amount of the purchase price in at-risk equity, and we are satisfiedthat the franchisee can meet its financial obligations. If the criteria for gain recognition are notmet, we defer the gain to the extent we have a remaining financial exposure in connection with thesales transaction. Deferred gains are recognized when the gain recognition criteria are met or asour financial exposure is reduced. When we make a decision to retain a store, or group of stores,previously held for sale, we revalue the store at the lower of its (a) net book value at our originalsale decision date less normal depreciation and amortization that would have been recorded duringthe period held for sale or (b) its current fair value. This value becomes the store’s new costbasis. We record any resulting difference between the store’s carrying amount and its new costbasis to Closure and impairment (income) expense.



When we decide to close a restaurant, it is reviewed for impairment and depreciable lives areadjusted based on the expected disposal date. Other costs incurred when closing a restaurant suchas costs of disposing of the assets as well as other facility-related expenses from previously closedstores are generally expensed as incurred. Additionally, at the date we cease using a propertyunder an operating lease, we record a liability for the net present value of any remaining leaseobligations, net of estimated sublease income, if any. Any costs recorded upon store closure aswell as any subsequent adjustments to liabilities for remaining lease obligations as a result of leasetermination or changes in estimates of sublease income are recorded in Closures and impairment(income) expenses. To the extent we sell assets, primarily land, associated with a closed store,any gain or loss upon that sale is also recorded in Closures and impairment (income) expenses.

Considerable management judgment is necessary to estimate future cash flows, including cashflows from continuing use, terminal value, sublease income and refranchisingproceeds. Accordingly, actual results could vary significantly from our estimates.

Impairment of Investments in Unconsolidated Affiliates. We record impairment chargesrelated to an investment in an unconsolidated affiliate whenever events or circumstances indicatethat a decrease in the fair value of an investment has occurred which is other than temporary. Inaddition, we evaluate our investments in unconsolidated affiliates for impairment when they haveexperienced two consecutive years of operating losses. We recorded no impairment associatedwith our investments in unconsolidated affiliates during 2011, 2010 and 2009.

Guarantees. We recognize, at inception of a guarantee, a liability for the fair value of certainobligations undertaken. The majority of our guarantees are issued as a result of assigning ourinterest in obligations under operating leases as a condition to the refranchising of certainCompany restaurants. We recognize a liability for the fair value of such lease guarantees uponrefranchisingand upon subsequent renewals of such leases when we remain contingently liable. The relatedexpense and any subsequent changes in the guarantees are included in Refranchising (gain)loss. The related expense and subsequent changes in the guarantees for other franchise supportguarantees not associated with a refranchising transaction are included in Franchise and licenseexpense.

Income Taxes. We record deferred tax assets and liabilities for the future tax consequencesattributable to temporary differences between the financial statement carrying amounts of existingassets and liabilities and their respective tax bases as well as operating loss and tax creditcarryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected toapply to taxable income in the years in which those differences are expected to be recovered orsettled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized inincome in the period that includes the enactment date. Additionally, in determining the need forrecording a valuation allowance against the carrying amount of deferred tax assets, we consider theamount of taxable income and periods over which it must be earned, actual levels of past taxableincome and known trends and events or transactions that are expected to affect future levels oftaxable income. Where we determine that it is more likely than not that all or a portion of an assetwill not be realized, we record a valuation allowance.

We recognize the benefit of positions taken or expected to be taken in our tax returns in our Incometax provision when it is more likely than not (i.e. a likelihood of more than fifty percent) that theposition would be sustained upon examination by tax authorities. A recognized tax position is thenmeasured at the largest amount of benefit that is greater than fifty percent likely of being realizedupon settlement. Changes in judgment that result in subsequent recognition, derecognition orchange in a measurement of a tax position taken in a prior annual period (including any relatedinterest and penalties) are recognized as a discrete item in the interim period in which the changeoccurs.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits ascomponents of its Income tax provision.




Fair Value Measurements. Fair value is the price we would receive to sell an asset or pay totransfer a liability (exit price) in an orderly transaction between market participants. For thoseassets and liabilities we record or disclose at fair value, we determine fair value based upon thequoted market price, if available. If a quoted market price is not available for identical assets, wedetermine fair value based upon the quoted market price of similar assets or the present value ofexpected future cash flows considering the risks involved, including counterparty performance riskif appropriate, and using discount rates appropriate for the duration. The fair values are assigned alevel within the fair value hierarchy, depending on the source of the inputs into the calculation.


Level 2 Inputs other than quoted prices included within Level 1 that are observable forthe asset, either directly or indirectly.


Cash and Cash Equivalents. Cash equivalents represent funds we have temporarily invested(with original maturities not exceeding three months), including short-term, highly liquid debtsecurities.

Receivables. The Company’s receivables are primarily generated as a result of ongoing businessrelationships with our franchisees and licensees as a result of franchise, license and leaseagreements. Trade receivables consisting of royalties from franchisees and licensees are generallydue within 30 days of the period in which the corresponding sales occur and are classifiedas Accounts and notes receivable on our Consolidated Balance Sheets. Our provision foruncollectible franchise and licensee receivable balances is based upon pre-defined aging criteriaor upon the occurrence of other events that indicate that we may not collect the balancedue. Additionally, we monitor the financial condition of our franchisees and licensees and recordprovisions for estimated losses on receivables when we believe it probable that our franchiseesor licensees will be unable to make their required payments. While we use the best informationavailable in making our determination, the ultimate recovery of recorded receivables is alsodependent upon future economic events and other conditions that may be beyond our control. Netprovisions for uncollectible franchise and license trade receivables of $7 million, $3 millionand $11 million were included in Franchise and license expenses in 2011, 2010 and 2009,respectively. The allowance for doubtful accounts, net of the aforementioned provisions,decreased during 2011 primarily due to write-offs and as a result of the LJS and A&W divestitures.Trade receivables that are ultimately deemed to be uncollectible, and for which collection effortshave been exhausted, are written off against the allowance for doubtful accounts.


Our financing receivables primarily consist of notes receivables and direct financing leases withfranchisees which we enter into from time to time. As these receivables primarily relate toour ongoing business agreements with franchisees and licensees, we consider such receivablesto have similar risk characteristics and evaluate them as one collective portfolio segment andclass for determining the allowance for doubtful accounts. We monitor the financial conditionof our franchisees and licensees and record provisions for estimated losses on receivables whenwe believe it probable that our franchisees or licensees will be unable to make their requiredpayments. Balances of notes receivable and direct financing leases due within one year are



included in Accounts and Notes Receivable while amounts due beyond one year are includedin Other assets. Amounts included in Other assets totaled $15 million (net of an allowanceof $4 million) and $57 million (net of an allowance of $30 million) at December 31, 2011and December 25, 2010, respectively. The decline was primarily due to direct financing leasereceivables sold as part of the LJS and A&W divestitures. Financing receivables that are ultimatelydeemed to be uncollectible, and for which collection efforts have been exhausted, are written offagainst the allowance for doubtful accounts. Interest income recorded on financing receivableshas traditionally been insignificant.

Inventories. We value our inventories at the lower of cost (computed on the first-in, first-outmethod) or market.

Property, Plant and Equipment. We state property, plant and equipment at cost less accumulateddepreciation and amortization. We calculate depreciation and amortization on a straight-linebasis over the estimated useful lives of the assets as follows: 5 to 25 years for buildings andimprovements, 3 to 20 years for machinery and equipment and 3 to 7 years for capitalizedsoftware costs. As discussed above, we suspend depreciation and amortization on assets related torestaurants that are held for sale.

Leases and Leasehold Improvements. The Company leases land, buildings or both for nearly6,200 of its restaurants worldwide. Lease terms, which vary by country and often include renewaloptions, are an important factor in determining the appropriate accounting for leases includingthe initial classification of the lease as capital or operating and the timing of recognition of rentexpense over the duration of the lease. We include renewal option periods in determining theterm of our leases when failure to renew the lease would impose a penalty on the Companyin such an amount that a renewal appears to be reasonably assured at the inception of thelease. The primary penalty to which we are subject is the economic detriment associated withthe existence of leasehold improvements which might be impaired if we choose not to continuethe use of the leased property. Leasehold improvements, which are a component of buildings andimprovements described above, are amortized over the shorter of their estimated useful lives or thelease term. We generally do not receive leasehold improvement incentives upon opening a storethat is subject to a lease.

We expense rent associated with leased land or buildings while a restaurant is being constructedwhether rent is paid or we are subject to a rent holiday. Additionally, certain of the Company'soperating leases contain predetermined fixed escalations of the minimum rent during the leaseterm. For leases with fixed escalating payments and/or rent holidays, we record rent expense on astraight-line basis over the lease term, including any option periods considered in the determinationof that lease term. Contingent rentals are generally based on sales levels in excess of stipulatedamounts, and thus are not considered minimum lease payments and are included in rent expensewhen attainment of the contingency is considered probable (e.g. when Company sales occur).

Internal Development Costs and Abandoned Site Costs. We capitalize direct costs associatedwith the site acquisition and construction of a Company unit on that site, including direct internalpayroll and payroll-related costs. Only those site-specific costs incurred subsequent to the timethat the site acquisition is considered probable are capitalized. If we subsequently make adetermination that a site for which internal development costs have been capitalized will not beacquired or developed, any previously capitalized internal development costs are expensed andincluded in G&A expenses.

Goodwill and Intangible Assets. From time to time, the Company acquires restaurants fromone of our Concept’s franchisees or acquires another business. Goodwill from these acquisitionsrepresents the excess of the cost of a business acquired over the net of the amounts assignedto assets acquired, including identifiable intangible assets and liabilities assumed. Goodwill isnot amortized and has been assigned to reporting units for purposes of impairment testing. Ourreporting units are our operating segments in the U.S. (see Note 18), our YRI business units(typically individual countries) and our China Division brands. We evaluate goodwill forimpairment on an annual basis or more often if an event occurs or circumstances change thatindicate impairments might exist. Goodwill impairment tests consist of a comparison of each



reporting unit’s fair value with its carrying value. Fair value is the price a willing buyer wouldpay for a reporting unit, and is generally estimated using discounted expected future after-tax cashflows from Company operations and franchise royalties. The discount rate is our estimate of therequired rate of return that a third-party buyer would expect to receive when purchasing a businessfrom us that constitutes a reporting unit. We believe the discount rate is commensurate with therisks and uncertainty inherent in the forecasted cash flows. If the carrying value of a reportingunit exceeds its fair value, goodwill is written down to its implied fair value. We have selected thebeginning of our fourth quarter as the date on which to perform our ongoing annual impairmenttest for goodwill.

If we record goodwill upon acquisition of a restaurant(s) from a franchisee and such restaurant(s)is then sold within two years of acquisition, the goodwill associated with the acquired restaurant(s)is written off in its entirety. If the restaurant is refranchised two years or more subsequent to itsacquisition, we include goodwill in the carrying amount of the restaurants disposed of based onthe relative fair values of the portion of the reporting unit disposed of in the refranchising and theportion of the reporting unit that will be retained. The fair value of the portion of the reporting unitdisposed of in a refranchising is determined by reference to the discounted value of the future cashflows expected to be generated by the restaurant and retained by the franchisee, which includesa deduction for the anticipated, future royalties the franchisee will pay us associated with thefranchise agreement entered into simultaneously with the refranchising transition. Appropriateadjustments are made if such franchise agreement includes terms that are determined to notbe at prevailing market rates. The fair value of the reporting unit retained is based on theprice a willing buyer would pay for the reporting unit and includes the value of franchiseagreements. As such, the fair value of the reporting unit retained can include expected cash flowsfrom future royalties from those restaurants currently being refranchised, future royalties fromexisting franchise businesses and company restaurant operations. As a result, the percentage of areporting unit’s goodwill that will be written off in a refranchising transaction will be less than thepercentage of the reporting unit’s company restaurants that are refranchised in that transaction andgoodwill can be allocated to a reporting unit with only franchise restaurants.

We evaluate the remaining useful life of an intangible asset that is not being amortized eachreporting period to determine whether events and circumstances continue to support an indefiniteuseful life. If an intangible asset that is not being amortized is subsequently determined to have afinite useful life, we amortize the intangible asset prospectively over its estimated remaining usefullife. Intangible assets that are deemed to have a definite life are amortized on a straight-line basisto their residual value.

For indefinite-lived intangible assets, our impairment test consists of a comparison of the fair valueof an intangible asset with its carrying amount. Fair value is an estimate of the price a willingbuyer would pay for the intangible asset and is generally estimated by discounting the expectedfuture after-tax cash flows associated with the intangible asset. We also perform our annual testfor impairment of our indefinite-lived intangible assets at the beginning of our fourth quarter.

Our definite-lived intangible assets that are not allocated to an individual restaurant are evaluatedfor impairment whenever events or changes in circumstances indicate that the carrying amount ofthe intangible asset may not be recoverable. An intangible asset that is deemed not recoverable ona undiscounted basis is written down to its estimated fair value, which is our estimate of the price awilling buyer would pay for the intangible asset based on discounted expected future after-tax cashflows. For purposes of our impairment analysis, we update the cash flows that were initially usedto value the definite-lived intangible asset to reflect our current estimates and assumptions over theasset’s future remaining life.

Derivative Financial Instruments. We use derivative instruments primarily to hedge interestrate and foreign currency risks. These derivative contracts are entered into with financialinstitutions. We do not use derivative instruments for trading purposes and we have procedures inplace to monitor and control their use.

We record all derivative instruments on our Consolidated Balance Sheet at fair value. Forderivative instruments that are designated and qualify as a fair value hedge, the gain or loss on



the derivative instrument as well as the offsetting gain or loss on the hedged item attributableto the hedged risk are recognized in the results of operations. For derivative instruments thatare designated and qualify as a cash flow hedge, the effective portion of the gain or loss onthe derivative instrument is reported as a component of other comprehensive income (loss) andreclassified into earnings in the same period or periods during which the hedged transaction affectsearnings. For derivative instruments that are designated and qualify as a net investment hedge,the effective portion of the gain or loss on the derivative instrument is reported in the foreigncurrency translation component of other comprehensive income (loss). Any ineffective portionof the gain or loss on the derivative instrument for a cash flow hedge or net investment hedgeis recorded in the results of operations immediately. For derivative instruments not designated ashedging instruments, the gain or loss is recognized in the results of operations immediately. SeeNote 12 for a discussion of our use of derivative instruments, management of credit risk inherentin derivative instruments and fair value information.

Common Stock Share Repurchases. From time to time, we repurchase shares of our CommonStock under share repurchase programs authorized by our Board of Directors. Shares repurchasedconstitute authorized, but unissued shares under the North Carolina laws under which we areincorporated. Additionally, our Common Stock has no par or stated value. Accordingly, werecord the full value of share repurchases, upon the trade date, against Common Stock on ourConsolidated Balance Sheet except when to do so would result in a negative balance in suchCommon Stock account. In such instances, on a period basis, we record the cost of any furthershare repurchases as a reduction in retained earnings. Due to the large number of sharerepurchases and the increase in the market value of our stock over the past several years, ourCommon Stock balance is frequently zero at the end of any period. Accordingly, $483 million inshare repurchases were recorded as a reduction in Retained Earnings in 2011. Our Common Stockbalance was such that no share repurchases impacted Retained Earnings in 2010. There were noshares of our Common Stock repurchased during 2009. See Note 16 for additional information.

Pension and Post-retirement Medical Benefits. We measure and recognize the overfundedor underfunded status of our pension and post-retirement plans as an asset or liability in ourConsolidated Balance Sheet as of our fiscal year end. The funded status represents the differencebetween the projected benefit obligations and the fair value of plan assets. The projected benefitobligation is the present value of benefits earned to date by plan participants, including the effect offuture salary increases, as applicable. The difference between the projected benefit obligations andthe fair value of plan assets that has not previously been recognized in our Consolidated Statementof Income is recorded as a component of Accumulated other comprehensive income (loss).



3MonthsEnded

12 Months Ended 3 MonthsEnded 12 Months Ended 12 Months Ended 12 Months Ended

Short-term Borrowings andLong-term Debt (Details)


Jun.11,

2011USD($)

Dec.31,

2011USD($)

Dec.25,

2010USD($)

Dec.26,

2009USD($)

Dec. 31,2011

SeniorUnsecuredNotes DueJuly 2012[Member]USD ($)

Dec. 31,2011

SeniorUnsecuredNotes DueApril 2016[Member]USD ($)

Dec. 31,2011

SeniorUnsecuredNotes Due

March2018

[Member]USD ($)

Dec. 31,2011

SeniorUnsecuredNotes DueNovember

2037[Member]USD ($)

Dec. 31,2011

SeniorUnsecuredNotes DueSeptember

2015[Member]USD ($)

Dec. 31,2011


2019[Member]USD ($)

Dec. 31,2011


2020[Member]USD ($)

Sep. 03,2011


2021[Member]USD ($)

Years

Dec. 31,2011


2021[Member]USD ($)

Dec. 31,2011


2014[Member]USD ($)

Dec. 31,2011


2014[Member]

CNY

Dec. 31,2011

Line ofCredit

[Member]USD ($)

Dec. 31, 2011Line ofCredit

[Member]Unsecured

InternationalRevolving

CreditFacility

[Member]USD ($)

days


[Member]Unsecured


CreditFacility

[Member]USD ($)


[Member]Unsecured


CreditFacility

[Member]LIBOR

[Member]


[Member]Unsecured


CreditFacility

[Member]CanadianAlternateBase Rate[Member]

Dec. 31,2011

Line ofCredit

[Member]UnsecuredRevolving

CreditFacility

[Member]USD ($)Banks

Dec. 25,2010

Line ofCredit


CreditFacility

[Member]USD ($)

Dec. 31,2011

Line ofCredit


CreditFacility

[Member]LIBOR

[Member]

Dec. 31,2011

Line ofCredit


CreditFacility

[Member]AlternateBase Rate[Member]

Dec. 31,2011

SeniorUnsecured

Notes[Member]USD ($)Months

days

Dec. 25,2010

SeniorUnsecured

Notes[Member]USD ($)

Dec. 31,2011

OtherDebt

[Member]USD ($)

Dec. 25,2010

OtherDebt

[Member]USD ($)

Short-term BorrowingsCurrent maturities of long-term debt $ 315$ 668

Current portion of fair valuehedge accounting adjustment 5 5

Revolving credit facilities,current 0 0 0 0

Total Short-term Borrowings 320 673Long-term DebtLong-term debt 3,012 3,257 0 64Capital lease obligations 279 236Total long-term debt 3,2913,557Current maturities of long-term debt (315) (668)

Long-term debt excludinglong-term portion of hedgeaccounting adjustment

2,9762,889

Long-term portion of fairvalue hedge accountingadjustment

21 26

Long-term debt includinghedge accounting adjustment 2,9972,915

Capital Lease ObligationsExcluded from AnnualMaturities

279 236

Derivative InstrumentAdjustments Excluded fromAnnual Maturities Table

26

Minimum principal paymentfailure amount that constitutesdefault

100 50

Line of Credit Facility[Abstract]Line of credit facility,maximum borrowing capacity 350 1,150

Line of credit facility,expiration date

November2012

November2012

Line of credit facility, numberof participating banks 6 24

Line of credit facility,minimum commitment fromparticipating banks

35 20

Line of credit facility,maximum commitment fromparticipating banks

90 93

Unused Credit Facility 350 727Outstanding letters of credit 423Outstanding borrowings 0 0Debt instrument, lower rangeof basis spread on variable rate 0.31% 0.25%

Debt instrument, upper rangeof basis spread on variable rate 1.50% 1.25%

Debt instrument, description ofvariable rate basis LIBOR

CanadianAlternateBase Rate

LIBOR AlternateBase Rate

Debt instrument, basis spreadon variable rate 0.50% 0.50%

Senior Unsecured Notes[Abstract]Issuance date June

2002[1] April

2006[1] October

2007[1] October

2007[1] August

2009[1] August

2009[1] August

2010[1] August

2011[1] September

2011[1] September

2011[1]

Maturity date July2012

April2016

March2018

November2037

September2015

September2019

November2020

November2021

September2014

September2014

Principal amount 263 300 600 600 250 250 350 350 350 56 350Interest rate, stated (inhundredths) 7.70% 6.25% 6.25% 6.88% 4.25% 5.30% 3.88% 3.75% 3.75% 2.38% 2.38%

Interest rate, effective (inhundredths) 8.06% [2] 6.03% [2] 6.38% [2] 7.29% [2] 4.44% [2] 5.59% [2] 4.01% [2] 3.88% [2] 2.92% [2] 2.92% [2]

Maturity date range, start 2012Maturity date range, end 2037Interest rate, stated, minimum(in hundredths) 2.38%

Interest rate, stated, maximum(in hundredths) 7.70%

Maturity term 10Repayments of SeniorUnsecured Notes 650

Number of months until firstrequired interest payment afterdebt issuance

6

Frequency of interestpayments

semi-annually

Senior unsecured notesnumber of days notice ondefault

30

Annual maturities of short-term borrowings and long-term debt excluding capitallease obligations andderivative instrumentadjustments [Abstract]2012 2632013 02014 562015 2502016 300Thereafter 2,150Total 3,019Interest expense on short-termborrowings and long-term debt $ 184$ 195 $

212[1] Interest payments commenced six months after issuance date and are payable semi-annually thereafter.[2] Includes the effects of the amortization of any (1) premium or discount; (2) debt issuance costs; and (3) gain or loss upon settlement of related treasury locks and forward-starting interest rate swaps utilized to hedge the interest rate risk prior to the debt issuance. Excludes the effect of any swaps that remain outstanding as described in Note 12.



12 Months EndedShare-based and DeferredCompensation Plans (Tables) Dec. 31, 2011

Compensation Related Costs[Abstract]Weighted-average assumptions usedin the Black-Scholes option-pricingmodel

We estimated the fair value of each stock option and SAR award as of the date ofgrant using the Black-Scholes option-pricing model with the following weighted-averageassumptions:

2011 2010 2009Risk-free interestrate 2.0% 2.4% 1.9%Expected term(years) 5.9 6.0 5.9Expected volatility 28.2% 30.0% 32.3%Expected dividendyield 2.0% 2.5% 2.6%

Summary of award activity Stock Options and SARs

Shares(in

thousands)


Price

Weighted-Average

RemainingContractual

Term

AggregateIntrinsicValue (inmillions)

Outstanding at the beginningof the year 36,438 $ 26.91Granted 5,023 49.59Exercised (6,645) 20.33Forfeited or expired (1,308) 35.52Outstanding at the end of theyear 33,508 (a) $ 31.28 5.96 $ 929Exercisable at the end of theyear 18,709 $ 26.00 4.48 $ 618

(a) Outstanding awards include 8,161 options and 25,347 SARs with averageexercise prices of $21.56 and $34.41, respectively.

Impact on net income The components of share-based compensation expense and the related income tax benefitsare shown in the following table:





12 Months EndedSummary of SignificantAccounting Policies (Policies) Dec. 31, 2011Accounting Policies[Abstract]Principles of Consolidationand Basis of Preparation

Principles of Consolidation and Basis of Preparation. Intercompany accounts and transactionshave been eliminated in consolidation. We consolidate entities in which we have a controllingfinancial interest, the usual condition of which is ownership of a majority voting interest. Wealso consider for consolidation an entity, in which we have certain interests, where the controllingfinancial interest may be achieved through arrangements that do not involve voting interests. Suchan entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primarybeneficiary. The primary beneficiary is the entity that possesses the power to direct the activitiesof the VIE that most significantly impact its economic performance and has the obligation toabsorb losses or the right to receive benefits from the VIE that are significant to it.

Our most significant variable interests are in entities that operate restaurants under our Concepts’franchise and license arrangements. We do not generally have an equity interest in our franchiseeor licensee businesses with the exception of certain entities in China as discussedbelow. Additionally, we do not typically provide significant financial support such as loans orguarantees to our franchisees and licensees. However, we do have variable interests in certainfranchisees through real estate lease arrangements with them to which we are a party. At theend of 2011, YUM has future lease payments due from franchisees, on a nominal basis, ofapproximately $320 million. As our franchise and license arrangements provide our franchiseeand licensee entities the power to direct the activities that most significantly impact their economicperformance, we do not consider ourselves the primary beneficiary of any such entity that mightotherwise be considered a VIE.

See Note 19 for additional information on an entity that operates a franchise lending program thatis a VIE in which we have a variable interest but for which we are not the primary beneficiary andthus do not consolidate.

Certain investments in entities that operate KFCs in China as well as our investment in Little SheepGroup Limited ("Little Sheep"), a Chinese casual dining concept headquartered in Inner Mongolia,China, are accounted for by the equity method. These entities are not VIEs and our lack ofmajority voting rights precludes us from controlling these affiliates. Thus, we do not consolidatethese affiliates, instead accounting for them under the equity method. Our share of the net incomeor loss of those unconsolidated affiliates is included in Other (income) expense. Subsequent tofiscal year 2011, we acquired an additional 66% interest in Little Sheep. As a result, we will beginconsolidating this business in 2012. In the second quarter of 2009 we began consolidating theentity that operates the KFCs in Shanghai, China, which was previously accounted for using theequity method. The increase in cash related to the consolidation of this entitiy's cash balance of$17 million is presented as a single line item on our 2009 Consolidated Statement of Cash Flows.

We report Net income attributable to the non-controlling interest in the entity that operates theKFCs in Beijing, China and since its consolidation, the Shanghai entity, separately on the face ofour Consolidated Statements of Income. The portion of equity in these entities not attributable tothe Company is reported within equity, separately from the Company’s equity on the ConsolidatedBalance Sheets.

See Note 4 for a further description of the accounting upon acquisition of additional interest in theShanghai entity.

We participate in various advertising cooperatives with our franchisees and licensees establishedto collect and administer funds contributed for use in advertising and promotional programsdesigned to increase sales and enhance the reputation of the Company and its franchise owners.Contributions to the advertising cooperatives are required for both Company-operated andfranchise restaurants and are generally based on a percent of restaurant sales. We maintain certain



variable interests in these cooperatives. As the cooperatives are required to spend all fundscollected on advertising and promotional programs, total equity at risk is not sufficient to permitthe cooperatives to finance their activities without additional subordinated financial support.Therefore, these cooperatives are VIEs. As a result of our voting rights, we consolidate certain ofthese cooperatives for which we are the primary beneficiary. The Advertising cooperatives assets,consisting primarily of cash received from the Company and franchisees and accounts receivablefrom franchisees, can only be used to settle obligations of the respective cooperative. TheAdvertising cooperative liabilities represent the corresponding obligation arising from the receiptof the contributions to purchase advertising and promotional programs for which creditors do nothave recourse to the general credit of the primary beneficiary. Therefore, we report all assetsand liabilities of these advertising cooperatives that we consolidate as Advertising cooperativeassets, restricted and Advertising cooperative liabilities in the Consolidated Balance Sheet. Asthe contributions to these cooperatives are designated and segregated for advertising, we act asan agent for the franchisees and licensees with regard to these contributions. Thus, we do notreflect franchisee and licensee contributions to these cooperatives in our Consolidated Statementsof Income or Consolidated Statements of Cash Flows.

Fiscal Year. Our fiscal year ends on the last Saturday in December and, as a result, a 53rd week isadded every five or six years. The first three quarters of each fiscal year consist of 12 weeks andthe fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal yearswith 53 weeks. Our subsidiaries operate on similar fiscal calendars except that China and certainother international subsidiaries operate on a monthly calendar, and thus never have a 53rd week,with two months in

Fiscal Year Fiscal Year. Our fiscal year ends on the last Saturday in December and, as a result, a 53rd weekis added every five or six years. The first three quarters of each fiscal year consist of 12 weeksand the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscalyears with 53 weeks. Our subsidiaries operate on similar fiscal calendars except that China andcertain other international subsidiaries operate on a monthly calendar, and thus never have a 53rdweek, with two months in the first quarter, three months in the second and third quarters and fourmonths in the fourth quarter. All of our international businesses except China close one period orone month earlier to facilitate consolidated reporting.

Foreign Currency iscal year 2011 included 53 weeks for our U.S. businesses and a portion of our YRI business. The53rd week added $91 million to total revenues, $15 million to Restaurant profit and $25 million toOperating Profit in our 2011 Consolidated Statement of Income. The $25 million benefit was offsetthroughout 2011 by investments, including franchise development incentives, as well as higher-than-normal spending, such as restaurant closures in the U.S. and YRI.

Foreign Currency. The functional currency determination for operations outside the U.S. isbased upon a number of economic factors, including but not limited to cash flows and financingtransactions. Income and expense accounts are translated into U.S. dollars at the average exchangerates prevailing during the period. Assets and liabilities are translated into U.S. dollars at exchangerates in effect at the balance sheet date. Resulting translation adjustments are recorded inAccumulated other comprehensive income (loss) in the Consolidated Balance Sheet and aresubsequently recognized as income or expense only upon sale or upon complete or substantiallycomplete liquidation of the related investme

Franchise and LicenseOperations Franchise and License Operations. We execute franchise or license agreements for each unit

operated by third parties which set out the terms of our arrangement with the franchisee orlicensee. Our franchise and license agreements typically require the franchisee or licensee to payan initial, non-refundable fee and continuing fees based upon a percentage of sales. Subject toour approval and their payment of a renewal fee, a franchisee may generally renew the franchiseagreement upon its expiration.

The internal costs we incur to provide support services to our franchisees and licensees arecharged to General and Administrative (“G&A”) expenses as incurred. Certain direct costs ofour franchise and license operations are charged to franchise and license expenses. These costsinclude provisions for estimated uncollectible fees, rent or depreciation expense associated withrestaurants we lease or sublease to franchisees, franchise and license marketing funding,



amortization expense for franchise-related intangible assets and certain other direct incrementalfranchise and license support costs.

Revenue RecognitionRevenue Recognition. Revenues from Company-operated restaurants are recognized whenpayment is tendered at the time of sale. The Company presents sales net of sales-relatedtaxes. Income from our franchisees and licensees includes initial fees, continuing fees, renewalfees and rental income from restaurants we lease or sublease to them. We recognize initial feesreceived from a franchisee or licensee as revenue when we have performed substantially all initialservices required by the franchise or license agreement, which is generally upon the opening of astore. We recognize continuing fees based upon a percentage of franchisee and licensee sales andrental income as earned. We recognize renewal fees when a renewal agreement with a franchiseeor licensee becomes effective. We present initial fees collected upon the sale of a restaurant to afranchisee in Refranchising (gain) loss.

Direct Marketing CostsDirect Marketing Costs. We charge direct marketing costs to expense ratably in relation torevenues over the year in which incurred and, in the case of advertising production costs, in theyear the advertisement is first shown. Deferred direct marketing costs, which are classified asprepaid expenses, consist of media and related advertising production costs which will generallybe used for the first time in the next fiscal year and have historically not been significant. To theextent we participate in advertising cooperatives, we expense our contributions as incurred whichare generally based on a percentage of sales. Our advertising expenses were $593 million, $557million and $548 million in 2011, 2010 and 2009, respectively. We report substantially all of ourdirect marketing costs in Occupancy and other operating expenses

Research and DevelopmentExpenses Research and Development Expenses. Research and development expenses, which we expense

as incurred, are reported in G&A expensesShare-Based EmployeeCompensation Share-Based Employee Compensation. We recognize all share-based payments to employees,

including grants of employee stock options and stock appreciation rights (“SARs”), in theConsolidated Financial Statements as compensation cost over the service period based on theirfair value on the date of grant. This compensation cost is recognized over the service period ona straight-line basis for the fair value of awards that actually vest. We present this compensationcost consistent with the other compensation costs for the employee recipient in either Payroll andemployee benefits or G&A expenses

Legal CostsLegal Costs. Settlement costs are accrued when they are deemed probable and estimable.Anticipated legal fees related to self-insured workers' compensation, employment practicesliability, general liability, automobile liability, product liability and property losses (collectively,"property and casualty losses") are accrued when deemed probable and estimable. Legal fees notrelated to self-insured property and casualty losses are recognized as incurred

Impairment or Disposal ofProperty, Plant and Equipment Impairment or Disposal of Property, Plant and Equipment. Property, plant and equipment

(“PP&E”) is tested for impairment whenever events or changes in circumstances indicate that thecarrying value of the assets may not be recoverable. The assets are not recoverable if their carryingvalue is less than the undiscounted cash flows we expect to generate from such assets. If the assetsare not deemed to be recoverable, impairment is measured based on the excess of their carryingvalue over their fair value.

For purposes of impairment testing for our restaurants, we have concluded that an individualrestaurant is the lowest level of independent cash flows unless our intent is to refranchiserestaurants as a group. We review our long-lived assets of such individual restaurants (primarilyPP&E and allocated intangible assets subject to amortization) semi-annually for impairment, orwhenever events or changes in circumstances indicate that the carrying amount of a restaurant maynot be recoverable. We use two consecutive years of operating losses as our primary indicatorof potential impairment for our semi-annual impairment testing of these restaurant assets. Weevaluate the recoverability of these restaurant assets by comparing the estimated undiscountedfuture cash flows, which are based on our entity-specific assumptions, to the carrying value



of such assets. For restaurant assets that are not deemed to be recoverable, we write-down animpaired restaurant to its estimated fair value, which becomes its new cost basis. Fair valueis an estimate of the price a franchisee would pay for the restaurant and its related assetsand is determined by discounting the estimated future after-tax cash flows of the restaurant,which include a deduction for the royalty the franchisee would pay us. The after-tax cash flowsincorporate reasonable assumptions we believe a franchisee would make such as sales growthand margin improvement. The discount rate used in the fair value calculation is our estimate ofthe required rate of return that a franchisee would expect to receive when purchasing a similarrestaurant and the related long-lived assets. The discount rate incorporates rates of returns forhistorical refranchising market transactions and is commensurate with the risks and uncertaintyinherent in the forecasted cash flows.

In executing our refranchising initiatives, we most often offer groups of restaurants for sale. Whenwe believe a restaurant or groups of restaurants will be refranchised for a price less than theircarrying value, but do not believe the restaurant(s) have met the criteria to be classified as held forsale, we review the restaurants for impairment. We evaluate the recoverability of these restaurantassets at the date it is considered more likely than not that they will be refranchised by comparingestimated sales proceeds plus holding period cash flows, if any, to the carrying value of therestaurant or group of restaurants. For restaurant assets that are not deemed to be recoverable,we recognize impairment for any excess of carrying value over the fair value of the restaurants,which is based on the expected net sales proceeds. To the extent ongoing agreements to be enteredinto with the franchisee simultaneous with the refranchising are expected to contain terms, such asroyalty rates, not at prevailing market rates, we consider the off-market terms in our impairmentevaluation. We recognize any such impairment charges in Refranchising (gain) loss. We classifyrestaurants as held for sale and suspend depreciation and amortization when (a) we make a decisionto refranchise; (b) the restaurants can be immediately removed from operations; (c) we have begunan active program to locate a buyer; (d) the restaurant is being actively marketed at a reasonablemarket price; (e) significant changes to the plan of sale are not likely; and (f) the sale is probablewithin one year. Restaurants classified as held for sale are recorded at the lower of their carryingvalue or fair value less cost to sell. We recognize estimated losses on restaurants that are classifiedas held for sale in Refranchising (gain) loss.

Refranchising (gain) loss includes the gains or losses from the sales of our restaurants to newand existing franchisees, including impairment charges discussed above, and the related initialfranchise fees. We recognize gains on restaurant refranchisings when the sale transaction closes,the franchisee has a minimum amount of the purchase price in at-risk equity, and we are satisfiedthat the franchisee can meet its financial obligations. If the criteria for gain recognition are notmet, we defer the gain to the extent we have a remaining financial exposure in connection with thesales transaction. Deferred gains are recognized when the gain recognition criteria are met or asour financial exposure is reduced. When we make a decision to retain a store, or group of stores,previously held for sale, we revalue the store at the lower of its (a) net book value at our originalsale decision date less normal depreciation and amortization that would have been recorded duringthe period held for sale or (b) its current fair value. This value becomes the store’s new costbasis. We record any resulting difference between the store’s carrying amount and its new costbasis to Closure and impairment (income) expense.

When we decide to close a restaurant, it is reviewed for impairment and depreciable lives areadjusted based on the expected disposal date. Other costs incurred when closing a restaurant suchas costs of disposing of the assets as well as other facility-related expenses from previously closedstores are generally expensed as incurred. Additionally, at the date we cease using a propertyunder an operating lease, we record a liability for the net present value of any remaining leaseobligations, net of estimated sublease income, if any. Any costs recorded upon store closure aswell as any subsequent adjustments to liabilities for remaining lease obligations as a result of leasetermination or changes in estimates of sublease income are recorded in Closures and impairment(income) expenses. To the extent we sell assets, primarily land, associated with a closed store,any gain or loss upon that sale is also recorded in Closures and impairment (income) expenses.



Considerable management judgment is necessary to estimate future cash flows, including cashflows from continuing use, terminal value, sublease income and refranchisingproceeds. Accordingly, actual results could vary significantly from our estimates.

ImpaImpairment of Investments inUnconsolidated Affiliates Impairment of Investments in Unconsolidated Affiliates. We record impairment charges

related to an investment in an unconsolidated affiliate whenever events or circumstances indicatethat a decrease in the fair value of an investment has occurred which is other than temporary. Inaddition, we evaluate our investments in unconsolidated affiliates for impairment when they haveexperienced two consecutive years of operating losses

GuaranteesGuarantees. We recognize, at inception of a guarantee, a liability for the fair value of certainobligations undertaken. The majority of our guarantees are issued as a result of assigning ourinterest in obligations under operating leases as a condition to the refranchising of certainCompany restaurants. We recognize a liability for the fair value of such lease guarantees uponrefranchisingand upon subsequent renewals of such leases when we remain contingently liable. The relatedexpense and any subsequent changes in the guarantees are included in Refranchising (gain)loss. The related expense and subsequent changes in the guarantees for other franchise supportguarantees not associated with a refranchising transaction are included in Franchise and licenseexpense.

Income TaxesIncome Taxes. We record deferred tax assets and liabilities for the future tax consequencesattributable to temporary differences between the financial statement carrying amounts of existingassets and liabilities and their respective tax bases as well as operating loss and tax creditcarryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected toapply to taxable income in the years in which those differences are expected to be recovered orsettled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized inincome in the period that includes the enactment date. Additionally, in determining the need forrecording a valuation allowance against the carrying amount of deferred tax assets, we consider theamount of taxable income and periods over which it must be earned, actual levels of past taxableincome and known trends and events or transactions that are expected to affect future levels oftaxable income. Where we determine that it is more likely than not that all or a portion of an assetwill not be realized, we record a valuation allowance.

We recognize the benefit of positions taken or expected to be taken in our tax returns in our Incometax provision when it is more likely than not (i.e. a likelihood of more than fifty percent) that theposition would be sustained upon examination by tax authorities. A recognized tax position is thenmeasured at the largest amount of benefit that is greater than fifty percent likely of being realizedupon settlement. Changes in judgment that result in subsequent recognition, derecognition orchange in a measurement of a tax position taken in a prior annual period (including any relatedinterest and penalties) are recognized as a discrete item in the interim period in which the changeoccurs.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits ascomponents of its Income tax provision.

SeeFair Value Measurements Fair Value Measurements. Fair value is the price we would receive to sell an asset or pay to

transfer a liability (exit price) in an orderly transaction between market participants. For thoseassets and liabilities we record or disclose at fair value, we determine fair value based upon thequoted market price, if available. If a quoted market price is not available for identical assets, wedetermine fair value based upon the quoted market price of similar assets or the present value ofexpected future cash flows considering the risks involved, including counterparty performance riskif appropriate, and using discount rates appropriate for the duration. The fair values are assigned alevel within the fair value hierarchy, depending on the source of the inputs into the calculation.




Level 2 Inputs other than quoted prices included within Level 1 that are observable forthe asset, either directly or indirectly.


Cash and Cash EquivalentsCash and Cash Equivalents. Cash equivalents represent funds we have temporarily invested(with original maturities not exceeding three months), including short-term, highly liquid debtsecurities.

Receivables Receivables. The Company’s receivables are primarily generated as a result of ongoing businessrelationships with our franchisees and licensees as a result of franchise, license and leaseagreements. Trade receivables consisting of royalties from franchisees and licensees are generallydue within 30 days of the period in which the corresponding sales occur and are classifiedas Accounts and notes receivable on our Consolidated Balance Sheets. Our provision foruncollectible franchise and licensee receivable balances is based upon pre-defined aging criteriaor upon the occurrence of other events that indicate that we may not collect the balancedue. Additionally, we monitor the financial condition of our franchisees and licensees and recordprovisions for estimated losses on receivables when we believe it probable that our franchiseesor licensees will be unable to make their required payments. While we use the best informationavailable in making our determination, the ultimate recovery of recorded receivables is alsodependent upon future economic events and other conditions that may be beyond our control. Netprovisions for uncollectible franchise and license trade receivables of $7 million, $3 millionand $11 million were included in Franchise and license expenses in 2011, 2010 and 2009,respectively. The allowance for doubtful accounts, net of the aforementioned provisions,decreased during 2011 primarily due to write-offs and as a result of the LJS and A&W divestitures.Trade receivables that are ultimately deemed to be uncollectible, and for which collection effortshave been exhausted, are written off against the allowance for doubtful accounts.


Our financing receivables primarily consist of notes receivables and direct financing leases withfranchisees which we enter into from time to time. As these receivables primarily relate toour ongoing business agreements with franchisees and licensees, we consider such receivablesto have similar risk characteristics and evaluate them as one collective portfolio segment andclass for determining the allowance for doubtful accounts. We monitor the financial conditionof our franchisees and licensees and record provisions for estimated losses on receivables whenwe believe it probable that our franchisees or licensees will be unable to make their requiredpayments. Balances of notes receivable and direct financing leases due within one year areincluded in Accounts and Notes Receivable while amounts due beyond one year are includedin Other assets. Amounts included in Other assets totaled $15 million (net of an allowanceof $4 million) and $57 million (net of an allowance of $30 million) at December 31, 2011and December 25, 2010, respectively. The decline was primarily due to direct financing leasereceivables sold as part of the LJS and A&W divestitures. Financing receivables that are ultimatelydeemed to be uncollectible, and for which collection efforts have been exhausted, are written offagainst the allowance for doubtful accounts. Interest income recorded on financing receivableshas tradi

InventoriesInventories. We value our inventories at the lower of cost (computed on the first-in, first-outmethod) or market



Property, Plant and EquipmentProperty, Plant and Equipment. We state property, plant and equipment at cost less accumulateddepreciation and amortization. We calculate depreciation and amortization on a straight-linebasis over the estimated useful lives of the assets as follows: 5 to 25 years for buildings andimprovements, 3 to 20 years for machinery and equipment and 3 to 7 years for capitalizedsoftware costs. As discussed above, we suspend depreciation and amortization on assets related torestaurants that are held for sale

Leases and LeaseholdImprovements Leases and Leasehold Improvements. The Company leases land, buildings or both for nearly

6,200 of its restaurants worldwide. Lease terms, which vary by country and often include renewaloptions, are an important factor in determining the appropriate accounting for leases includingthe initial classification of the lease as capital or operating and the timing of recognition of rentexpense over the duration of the lease. We include renewal option periods in determining theterm of our leases when failure to renew the lease would impose a penalty on the Companyin such an amount that a renewal appears to be reasonably assured at the inception of thelease. The primary penalty to which we are subject is the economic detriment associated withthe existence of leasehold improvements which might be impaired if we choose not to continuethe use of the leased property. Leasehold improvements, which are a component of buildings andimprovements described above, are amortized over the shorter of their estimated useful lives or thelease term. We generally do not receive leasehold improvement incentives upon opening a storethat is subject to a lease.

We expense rent associated with leased land or buildings while a restaurant is being constructedwhether rent is paid or we are subject to a rent holiday. Additionally, certain of the Company'soperating leases contain predetermined fixed escalations of the minimum rent during the leaseterm. For leases with fixed escalating payments and/or rent holidays, we record rent expense on astraight-line basis over the lease term, including any option periods considered in the determinationof that lease term. Contingent rentals are generally based on sales levels in excess of stipulatedamounts, and thus are not considered minimum lease payments and are included in rent expensewhen attainment of the contingency is considered probable (e.g. when Company sales occur).

InternaInternal Development Costsand Abandoned Site Costs Internal Development Costs and Abandoned Site Costs. We capitalize direct costs associated

with the site acquisition and construction of a Company unit on that site, including direct internalpayroll and payroll-related costs. Only those site-specific costs incurred subsequent to the timethat the site acquisition is considered probable are capitalized. If we subsequently make adetermination that a site for which internal development costs have been capitalized will not beacquired or developed, any previously capitalized internal development costs are expensed andincluded in G&A expenses

Goodwill and IntangibleAssets Goodwill and Intangible Assets. From time to time, the Company acquires restaurants from

one of our Concept’s franchisees or acquires another business. Goodwill from these acquisitionsrepresents the excess of the cost of a business acquired over the net of the amounts assignedto assets acquired, including identifiable intangible assets and liabilities assumed. Goodwill isnot amortized and has been assigned to reporting units for purposes of impairment testing. Ourreporting units are our operating segments in the U.S. (see Note 18), our YRI business units(typically individual countries) and our China Division brands. We evaluate goodwill forimpairment on an annual basis or more often if an event occurs or circumstances change thatindicate impairments might exist. Goodwill impairment tests consist of a comparison of eachreporting unit’s fair value with its carrying value. Fair value is the price a willing buyer wouldpay for a reporting unit, and is generally estimated using discounted expected future after-tax cashflows from Company operations and franchise royalties. The discount rate is our estimate of therequired rate of return that a third-party buyer would expect to receive when purchasing a businessfrom us that constitutes a reporting unit. We believe the discount rate is commensurate with therisks and uncertainty inherent in the forecasted cash flows. If the carrying value of a reportingunit exceeds its fair value, goodwill is written down to its implied fair value. We have selected the



beginning of our fourth quarter as the date on which to perform our ongoing annual impairmenttest for goodwill.

If we record goodwill upon acquisition of a restaurant(s) from a franchisee and such restaurant(s)is then sold within two years of acquisition, the goodwill associated with the acquired restaurant(s)is written off in its entirety. If the restaurant is refranchised two years or more subsequent to itsacquisition, we include goodwill in the carrying amount of the restaurants disposed of based onthe relative fair values of the portion of the reporting unit disposed of in the refranchising and theportion of the reporting unit that will be retained. The fair value of the portion of the reporting unitdisposed of in a refranchising is determined by reference to the discounted value of the future cashflows expected to be generated by the restaurant and retained by the franchisee, which includesa deduction for the anticipated, future royalties the franchisee will pay us associated with thefranchise agreement entered into simultaneously with the refranchising transition. Appropriateadjustments are made if such franchise agreement includes terms that are determined to notbe at prevailing market rates. The fair value of the reporting unit retained is based on theprice a willing buyer would pay for the reporting unit and includes the value of franchiseagreements. As such, the fair value of the reporting unit retained can include expected cash flowsfrom future royalties from those restaurants currently being refranchised, future royalties fromexisting franchise businesses and company restaurant operations. As a result, the percentage of areporting unit’s goodwill that will be written off in a refranchising transaction will be less than thepercentage of the reporting unit’s company restaurants that are refranchised in that transaction andgoodwill can be allocated to a reporting unit with only franchise restaurants.

We evaluate the remaining useful life of an intangible asset that is not being amortized eachreporting period to determine whether events and circumstances continue to support an indefiniteuseful life. If an intangible asset that is not being amortized is subsequently determined to have afinite useful life, we amortize the intangible asset prospectively over its estimated remaining usefullife. Intangible assets that are deemed to have a definite life are amortized on a straight-line basisto their residual value.

For indefinite-lived intangible assets, our impairment test consists of a comparison of the fair valueof an intangible asset with its carrying amount. Fair value is an estimate of the price a willingbuyer would pay for the intangible asset and is generally estimated by discounting the expectedfuture after-tax cash flows associated with the intangible asset. We also perform our annual testfor impairment of our indefinite-lived intangible assets at the beginning of our fourth quarter.

Our definite-lived intangible assets that are not allocated to an individual restaurant are evaluatedfor impairment whenever events or changes in circumstances indicate that the carrying amount ofthe intangible asset may not be recoverable. An intangible asset that is deemed not recoverable ona undiscounted basis is written down to its estimated fair value, which is our estimate of the price awilling buyer would pay for the intangible asset based on discounted expected future after-tax cashflows. For purposes of our impairment analysis, we update the cash flows that were initially usedto value the definite-lived intangible asset to reflect our current estimates and assumptions over theasset’s future remaining life.

Derivative FinancialInstruments Derivative Financial Instruments. We use derivative instruments primarily to hedge interest

rate and foreign currency risks. These derivative contracts are entered into with financialinstitutions. We do not use derivative instruments for trading purposes and we have procedures inplace to monitor and control their use.

We record all derivative instruments on our Consolidated Balance Sheet at fair value. Forderivative instruments that are designated and qualify as a fair value hedge, the gain or loss onthe derivative instrument as well as the offsetting gain or loss on the hedged item attributableto the hedged risk are recognized in the results of operations. For derivative instruments thatare designated and qualify as a cash flow hedge, the effective portion of the gain or loss onthe derivative instrument is reported as a component of other comprehensive income (loss) andreclassified into earnings in the same period or periods during which the hedged transaction affectsearnings. For derivative instruments that are designated and qualify as a net investment hedge,



the effective portion of the gain or loss on the derivative instrument is reported in the foreigncurrency translation component of other comprehensive income (loss). Any ineffective portionof the gain or loss on the derivative instrument for a cash flow hedge or net investment hedgeis recorded in the results of operations immediately. For derivative instruments not designated ashedging instruments, the gain or loss is recognized in the results of operations immediately. SeeNote 12 for a discussion of our use of derivative instruments, management of credit risk inherentin derivative instruments and fair value information.

ComCommon Stock ShareRepurchases Common Stock Share Repurchases. From time to time, we repurchase shares of our Common

Stock under share repurchase programs authorized by our Board of Directors. Shares repurchasedconstitute authorized, but unissued shares under the North Carolina laws under which we areincorporated. Additionally, our Common Stock has no par or stated value. Accordingly, werecord the full value of share repurchases, upon the trade date, against Common Stock on ourConsolidated Balance Sheet except when to do so would result in a negative balance in suchCommon Stock account. In such instances, on a period basis, we record the cost of any furthershare repurchases as a reduction in retained earnings

Pension and Post-retirementMedical Benefits Pension and Post-retirement Medical Benefits. We measure and recognize the overfunded

or underfunded status of our pension and post-retirement plans as an asset or liability in ourConsolidated Balance Sheet as of our fiscal year end. The funded status represents the differencebetween the projected benefit obligations and the fair value of plan assets. The projected benefitobligation is the present value of benefits earned to date by plan participants, including the effect offuture salary increases, as applicable. The difference between the projected benefit obligations andthe fair value of plan assets that has not previously been recognized in our Consolidated Statementof Income is recorded as a component of Accumulated other comprehensive income (loss).



12 Months EndedSubsequent Event Dec. 31, 2011Subsequent Events[Abstract]Subsequent Event Subsequent Event

On February 1, 2012, subsequent to the end of the fourth quarter, we paid $584 million to acquirean additional 66% interest in Little Sheep, which brought our total ownership to approximately93% of the business. Upon acquisition, we have voting control of Little Sheep and thus will beginto consolidate its results.



12 Months EndedSupplemental Cash FlowData (Details) (USD $)


Dec. 31, 2011Dec. 25, 2010 Dec. 26, 2009

Cash Paid For:Interest $ 199 $ 190 $ 209Income taxes 349 357 308Significant Non-Cash Investing and Financing Activities:Capital lease obligations incurred to acquire assets 58 16 7Increase (decrease) in accrued capital expenditures $ 55 $ 51 $ (17)



12 Months EndedShareholders' Equity(Tables) Dec. 31, 2011

Stockholders' Equity Note[Abstract]Repurchase of Shares of theCompany's Common Stock Shares Repurchased

(thousands)Dollar Value of Shares

RepurchasedAuthorization Date 2011 2010 2009 2011 2010 2009

November 2011 — — — $ — $ — $ —January 2011 10,864 — — 562 — —March 2010 3,441 2,161 — 171 107 —September 2009 — 7,598 — — 283 —

Total 14,305 (a) 9,759 (a) — $ 733 (a) $ 390 (a) $ —

(a) 2011 amount excludes and 2010 amount includes the effect of $19 million in sharerepurchases (0.4 million shares) with trade dates prior to the 2010 fiscal year end butcash settlement dates subsequent to the 2010 fiscal year.

Accumulated othercomprehensive income (loss)

The following table gives further detail regarding the composition of accumulated othercomprehensive loss at December 31, 2011 and December 25, 2010. Refer to Note 14 foradditional information about our pension and post-retirement plan accounting and Note 12 foradditional information about our derivative instruments.





12 Months EndedSummary of SignificantAccounting Policies (Tables) Dec. 31, 2011

Accounting Policies [Abstract]Accounts and notes receivable, net

2011 2010Accounts and notes receivable $ 308 $ 289Allowance for doubtful accounts (22) (33)Accounts and notes receivable,net $ 286 $ 256



12 Months EndedEarnings Per CommonShare ("EPS") (Tables) Dec. 31, 2011

Earnings Per Share[Abstract]Earnings Per Common Share

2011 2010 2009

Net Income – YUM! Brands, Inc. $ 1,319 $ 1,158 $ 1,071Weighted-average common shares outstanding (for basiccalculation) 469 474 471Effect of dilutive share-based employee compensation 12 12 12Weighted-average common and dilutive potential commonshares outstanding (for diluted calculation) 481 486 483

Basic EPS $ 2.81 $ 2.44 $ 2.28

Diluted EPS $ 2.74 $ 2.38 $ 2.22Unexercised employee stock options and stock appreciationrights (in millions) excluded from the diluted EPScomputation(a) 4.2 2.2 13.3

(a) These unexercised employee stock options and stock appreciation rights were notincluded in the computation of diluted EPS because to do so would have been antidilutivefor the periods presented.



12 Months EndedDescription of Business Dec. 31, 2011Organization, Consolidationand Presentation ofFinancial Statements[Abstract]Description of Business Description of Business

YUM! Brands, Inc. and Subsidiaries (collectively referred to as “YUM” or the “Company”)comprises the worldwide operations of KFC, Pizza Hut and Taco Bell (collectively the“Concepts”). YUM is the world’s largest quick service restaurant company based on the numberof system units, with approximately 37,000 units of which approximately 50% are located outsidethe U.S. in more than 120 countries and territories. YUM was created as an independent, publicly-owned company on October 6, 1997 via a tax-free distribution by our former parent, PepsiCo,Inc., of our Common Stock to its shareholders. References to YUM throughout these ConsolidatedFinancial Statements are made using the first person notations of “we,” “us” or “our.”

Through our widely-recognized Concepts, we develop, operate, franchise and license a systemof both traditional and non-traditional quick service restaurants. Each Concept has proprietarymenu items and emphasizes the preparation of food with high quality ingredients as well asunique recipes and special seasonings to provide appealing, tasty and attractive food at competitiveprices. Our traditional restaurants feature dine-in, carryout and, in some instances, drive-thru ordelivery service. Non-traditional units, which are principally licensed outlets, include expressunits and kiosks which have a more limited menu and operate in non-traditional locations likemalls, airports, gasoline service stations, train stations, subways, convenience stores, stadiums,amusement parks and colleges, where a full-scale traditional outlet would not be practical orefficient. We also operate multibrand units, where two or more of our Concepts are operated in asingle unit.

YUM consists of five operating segments: YUM Restaurants China ("China" or “ChinaDivision”), YUM Restaurants International (“YRI” or “International Division”), KFC U.S., PizzaHut U.S., and Taco Bell U.S. The China Division includes mainland China, and the InternationalDivision includes the remainder of our international operations. For financial reporting purposes,management considers the three U.S. operating segments to be similar and, therefore, hasaggregated them into a single reportable operating segment (“U.S.”). In December 2011 we soldour Long John Silver's ("LJS") and A&W All American Food Restaurants ("A&W") brands to keyfranchise leaders and strategic investors in separate transactions. The results for these businessesthrough the sale date are included in the Company's results for 2011, 2010 and 2009. As a result ofchanges to our management reporting structure, in the first quarter of 2012 we will begin reportinginformation for our India business as a standalone reporting segment separated from YRI. Whileour consolidated results will not be impacted, we will restate our historical segment informationduring 2012 for consistent presentation.



12 Months EndedItems AffectingComparability of Net

Income and Cash Flows(Tables)

Dec. 31, 2011

Activity Related To ReservesFor Remaining LeaseObligations [Text Block]

The following table summarizes the 2011 and 2010 activity related to reserves for remaining lease obligations for closedstores.





Refranchising (gain) lossFacility Actions The Refranchising (gain) loss by reportable segment is presented below. We do not allocate such gains and losses to our

segments for performance reporting purposes.


China $ (14) $ (8) $ (3)YRI (a)(b)(c) 69 53 11U.S. (d) 17 18 (34)

Worldwide $ 72 $ 63 $ (26)

(a) During the year ended December 31, 2011 we decided to refranchise or close all of our remaining Company-operated Pizza Hut restaurants in the UK market. While an asset group comprising approximately 350 dine-in restaurants did not meet the criteria for held-for-sale classification as of December 31, 2011, our- decisionto sell was considered an impairment indicator. As such we reviewed this asset group for potential impairmentand determined that its carrying value was not recoverable based upon our estimate of expected refranchisingproceeds and holding period cash flows anticipated while we continue to operate the restaurants as companyunits. Accordingly, we wrote this asset group down to our estimate of its fair value, which is based on the salesprice we would expect to receive from a buyer. This fair value determination considered current market conditions,trends in the Pizza Hut UK business, and prices for similar transactions in the restaurant industry and resulted ina non-cash pre-tax write-down of $74 million which was recorded to Refranchising (gain) loss. This impairmentcharge decreased depreciation expense versus what would have otherwise been recorded by $3 million in 2011.This depreciation reduction was not allocated to the YRI segment, resulting in depreciation expense in the YRIsegment results continuing to be recorded at the rate at which it was prior to the impairment charges being recordedfor these restaurants. We will continue to review the asset group for any further necessary impairment until thedate it is sold. The write-down does not include any allocation of the Pizza Hut UK reporting unit goodwill in theasset group carrying value. This additional non-cash write-down would be recorded, consistent with our historicalpolicy, if the asset group ultimately meets the criteria to be classified as held for sale. Upon the ultimate sale of therestaurants, depending on the form of the transaction, we could also be required to record a charge for the fair valueof any guarantee of future lease payments for any leases we assign to a franchisee and for the cumulative foreigncurrency translation adjustment associated with Pizza Hut UK. The decision to refranchise or close all remainingPizza Hut restaurants in the UK was considered to be a goodwill impairment indicator. We determined that the fairvalue of our Pizza Hut UK reporting unit exceeded its carrying value and as such there was no impairment of theapproximately $100 million in goodwill attributable to the reporting unit.

(b) In the year ended December 25, 2010 we recorded a $52 million loss on the refranchising of our Mexico equitymarket as we sold all of our Company-owned restaurants, comprised of 222 KFCs and 123 Pizza Huts, to anexisting Latin American franchise partner. The buyer is serving as the master franchisee for Mexico which had 102KFC and 53 Pizza Hut franchise restaurants at the time of the transaction. The write-off of goodwill included inthis loss was minimal as our Mexico reporting unit included an insignificant amount of goodwill. This loss did notresult in any related income tax benefit.

(c) During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as a result ofour decision to offer to refranchise our KFC Taiwan equity market. During the year ended December 25, 2010 werefranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included inour December 25, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the losson refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit. The amount of goodwillwrite-off was based on the relative fair values of the Taiwan business disposed of and the portion of the business



that was retained. The fair value of the business disposed of was determined by reference to the discounted valueof the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include adeduction for the anticipated royalties the franchisee will pay the Company associated with the franchise agreemententered into in connection with this refranchising transaction. The fair value of the Taiwan business retainedconsists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associatedwith the franchise agreement entered into in connection with this refranchising transaction. We believe the termsof the franchise agreement entered into in connection with the Taiwan refranchising are substantially consistentwith market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after theaforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceededits carrying amount.

(d) U.S. refranchising losses in the years ended December 31, 2011 and December 25, 2010 are primarily due to losseson sales of and offers to refranchise KFCs in the U.S. There were approximately 250 and 600 KFC restaurantsoffered for refranchising as of December 31, 2011 and December 25, 2010, respectively. While we did not yetbelieve these KFCs met the criteria to be classified as held for sale, we did, consistent with our historical practice,review the restaurants for impairment as a result of our offer to refranchise. We recorded impairment chargeswhere we determined that the carrying value of restaurant groups to be sold was not recoverable based uponour estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue tooperate the restaurants as company units. For those restaurant groups deemed impaired, we wrote such restaurantgroups down to our estimate of their fair values, which were based on the sales price we would expect to receivefrom a franchisee for each restaurant group. This fair value determination considered current market conditions,real-estate values, trends in the KFC U.S. business, prices for similar transactions in the restaurant industryand preliminary offers for the restaurant groups to date. The non-cash impairment charges that were recordedrelated to our offers to refranchise these company-operated KFC restaurants in the U.S. decreased depreciationexpense versus what would have otherwise been recorded by $10 million and $9 million in the years endedDecember 31, 2011 and December 25, 2010, respectively. These depreciation reductions were not allocated to theU.S. segment resulting in depreciation expense in the U.S. segment results continuing to be recorded at the rateat which it was prior to the impairment charges being recorded for these restaurants. We will continue to reviewthe restaurant groups for any further necessary impairment until the date they are sold. The aforementioned non-cash impairment charges do not include any allocation of the KFC reporting unit goodwill in the restaurant groupcarrying value. This additional non-cash write-down would be recorded, consistent with our historical policy, ifthe restaurant groups, or any subset of the restaurant groups, ultimately meet the criteria to be classified as held forsale. We will also be required to record a charge for the fair value of our guarantee of future lease payments forleases we assign to the franchisee upon any sale.

Closures and impairment(income) expensesFacility Actions Store closure (income) costs and Store impairment charges by reportable segment are presented below. These tables exclude

$80 million of net losses recorded in 2011 related to the LJS and A&W divestitures and a $26 million goodwill impairmentcharge recorded in 2009 related to the LJS and A&W businesses we previously owned. Neither of these amounts wereallocated to segments for performance reporting purposes:










(a) Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated aCompany restaurant that was closed, lease reserves established when we cease using a property under an operating



lease and subsequent adjustments to those reserves and other facility-related expenses from previously closedstores.

(b) The 2009 store impairment charges for YRI include $12 million of goodwill impairment for our Pizza Hut SouthKorea market.



12 Months EndedDerivative Instruments(Tables) Dec. 31, 2011

Derivative Instruments and HedgingActivities Disclosure [Abstract]Fair Values of Derivatives Designated asHedging Instruments

The fair values of derivatives designated as hedging instruments for the years endedDecember 31, 2011 and December 25, 2010 were:

Fair Value Consolidated Balance SheetLocation

2011 2010

Interest Rate Swaps - Asset $ 10$ 8 Prepaid expenses and other

current assetsInterest Rate Swaps - Asset 22 33 Other assetsForeign Currency Forwards -Asset 3

7 Prepaid expenses and othercurrent assets

Foreign Currency Forwards -Liability (1)

(3) Accounts payable and othercurrent liabilities

Total $ 34 $ 45

Other Comprehensive Income (OCI)from the Effective Portions of Gains andLosses of Foreign Currency ForwardContracts

For our foreign currency forward contracts the following effective portions of gainsand losses were recognized into Other Comprehensive Income (“OCI”) andreclassified into income from OCI in the years ended December 31, 2011 andDecember 25, 2010.

2011 2010Gains (losses) recognized into OCI, net of tax $ 2 $ 32Gains (losses) reclassified from Accumulated OCI into income,net of tax $ 1

$ 33



12 Months EndedSummary of SignificantAccounting Policies (Details

4) (USD $)In Millions, except Sharedata in Thousands, unless

otherwise specified

Dec. 31, 2011 Dec. 25, 2010 Dec. 26, 2009

Repurchase Of Shares Of Common Stock [Abstract]Stock Repurchased During Period, Value $ 733 [1] $ 390 [1] $ 0Repurchase of shares of Common Stock (in shares) (14,305) [1] (9,759) [1] 0Reduction to Retained earningsRepurchase Of Shares Of Common Stock [Abstract]Stock Repurchased During Period, Value $ 483 $ 0 $ 0[1] 2011 amount excludes and 2010 amount includes the effect of $19 million in share repurchases (0.4 million

shares) with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010fiscal year.



Income Taxes (Details 3)(USD $)


Dec. 31, 2011

Operating and capital loss carryforwards [Line Items]Amount of operating and capital loss carryforwards due to expire in 2012 $ 26Amount of operating and capital loss carryforwards due to expire between 2013 and 2016 258Amount of operating and capital loss carryforwards due to expire between 2017 and 2031 1,906Amount of operating and capital loss carryforwards which may be carried forward indefinitely 838Total operating and capital loss carryforwards 3,028Foreign [Member]Operating and capital loss carryforwards [Line Items]Amount of operating and capital loss carryforwards due to expire in 2012 4Amount of operating and capital loss carryforwards due to expire between 2013 and 2016 66Amount of operating and capital loss carryforwards due to expire between 2017 and 2031 136Amount of operating and capital loss carryforwards which may be carried forward indefinitely 833Total operating and capital loss carryforwards 1,039U.S. federal and state [Member]Operating and capital loss carryforwards [Line Items]Amount of operating and capital loss carryforwards due to expire in 2012 22Amount of operating and capital loss carryforwards due to expire between 2013 and 2016 192Amount of operating and capital loss carryforwards due to expire between 2017 and 2031 1,770Amount of operating and capital loss carryforwards which may be carried forward indefinitely 5Total operating and capital loss carryforwards $ 1,989



Consolidated Balance Sheets(Parenthetical) (USD $) Dec. 31, 2011Dec. 25, 2010

Shareholders' Equity (Deficit)Common Stock, par value $ 0 $ 0Common Stock, shares authorized 750 750Common Stock, shares issued 460 469



12 Months EndedIncome Taxes (Tables) Dec. 31, 2011Income Tax Disclosure[Abstract]Income before income taxes U.S. and foreign income before taxes are set forth below:

2011 2010 2009U.S. $ 266 $ 345 $ 269Foreign 1,393 1,249 1,127

$ 1,659 $ 1,594 $ 1,396

Details of income taxprovision (benefit)


2011 2010 2009Current: Federal $ 78 $ 155 $ (21)

Foreign 374 356 251State 9 15 11

$ 461 $ 526 241


(137) (110) 72$ 324 $ 416 $ 313

Effective income tax and taxrate reconciliation

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to our effectivetax rate is set forth below:

2011 2010 2009U.S. federal statutory rate $ 580 35.0 % $ 558 35.0 % $ 489 35.0 %State income tax, net of federaltax benefit 2 0.1 12 0.7 14 1.0Statutory rate differentialattributable to foreignoperations (218) (13.1) (235) (14.7) (159) (11.4)Adjustments to reserves andprior years 24 1.4 55 3.5 (9) (0.6)Net benefit from LJS andA&W divestitures (72) (4.3) — — — —Change in valuation allowances 22 1.3 22 1.4 (9) (0.7)Other, net (14) (0.9) 4 0.2 (13) (0.9)


Details of deferred tax assets(liabilities)


2011 2010Operating losses and tax credit carryforwards $ 590 $ 335Employee benefits 259 171



Share-based compensation 106 102Self-insured casualty claims 47 50Lease-related liabilities 137 166Various liabilities 72 89Deferred income and other 49 97






$ 600 $ 356

Loss carryforwards, by year ofexpiration

These losses are being carried forward in jurisdictions where we are permitted to use tax lossesfrom prior periods to reduce future taxable income and will expire as follows:



$ 26 $ 258 $ 1,906 $ 838 $ 3,028

Unrecognized tax benefitsreconciliation

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:



End of Year $ 348 $ 308

Summary of income taxexaminations

The following table summarizes our major jurisdictions and the tax years that are either currentlyunder audit or remain open and subject to examination:

Jurisdiction Open Tax YearsU.S. Federal 2004 – 2011China 2008 – 2011



United Kingdom 2003 – 2011Mexico 2005 – 2011Australia 2007 – 2011

In addition, the Company is subject to various U.S. state income tax examinations, for which, inthe aggregate, we had significant unrecognized tax benefits at December 31, 2011, each of whichis individually insignificant.

The accrued interest and penalties related to income taxes at December 31, 2011 and December 25,2010 are set forth below:




Consolidated Balance Sheets(USD $)


Dec. 31,2011

Dec. 25,2010

Current AssetsCash and cash equivalents $ 1,198 $ 1,426Accounts and notes receivable, net 286 256Inventories 273 189Prepaid expenses and other current assets 338 269Deferred income taxes 112 61Advertising cooperative assets, restricted 114 112Total Current Assets 2,321 2,313Property, plant and equipment, net 4,042 3,830Goodwill 681 [1] 659Intangible assets, net 299 475Investments in unconsolidated affiliates 167 154Restricted cash 300 0Other assets 475 519Deferred income taxes 549 366Total Assets 8,834 [2] 8,316 [2]

Current LiabilitiesAccounts payable and other current liabilities 1,874 1,602Income taxes payable 142 61Short-term borrowings 320 673Advertising cooperative liabilities 114 112Total Current Liabilities 2,450 2,448Long-term debt 2,997 2,915Other liabilities and deferred credits 1,471 1,284Total Liabilities 6,918 6,647Shareholders' EquityCommon stock, no par value, 750 shares authorized; 460 shares and 469 shares issued in2011 and 2010, respectively 18 86

Retained earnings 2,052 1,717Accumulated other comprehensive income (loss) (247) (227)Total Shareholders' Equity - YUM! Brands, Inc. 1,823 1,576Noncontrolling interest 93 93Total Shareholders' Equity 1,916 1,669Total Liabilities and Shareholders' Equity $ 8,834 $ 8,316[1] As a result of the LJS and A&W divestitures in 2011, we disposed of $26 million of goodwill that was fully

impaired in 2009.[2] China includes investments in 4 unconsolidated affiliates totaling $167 million, $154 million and $144

million, for 2011, 2010 and 2009, respectively.



12 Months EndedSupplemental Balance SheetInformation (Details) (USD

$)In Millions, unless otherwise

specified

Dec. 31,2011

Dec. 25,2010

Dec. 26,2009

Prepaid Expenses and Other Current AssetsIncome tax receivable $ 150 $ 115Assets held for sale 24 23Other prepaid expenses and current assets 164 131Prepaid expenses and other current assets 338 269Property, Plant and Equipment [Line Items]Property, Plant and equipment, gross 7,267 7,103Accumulated depreciation and amortization (3,225) (3,273)Property, Plant and equipment, net 4,042 3,830Depreciation and amortization expense related to property, plant andequipment 599 565 553

Accounts Payable and Other Current LiabilitiesAccounts payable 712 540Accrued capital expenditures 229 174Accrued compensation and benefits 440 357Dividends payable 131 118Accrued taxes, other than income taxes 112 95Other current liabilities 250 318Accounts payable and other current liabilities 1,874 1,602LandProperty, Plant and Equipment [Line Items]Property, Plant and equipment, gross 527 542Buildings and improvementsProperty, Plant and Equipment [Line Items]Property, Plant and equipment, gross 3,856 3,709Capital leases, primarily buildingsProperty, Plant and Equipment [Line Items]Property, Plant and equipment, gross 316 274Machinery and equipmentProperty, Plant and Equipment [Line Items]Property, Plant and equipment, gross $ 2,568 $ 2,578



12 Months EndedOther (Income) Expense(Tables) Dec. 31, 2011

Other Income and Expenses[Abstract]Other (Income) Expense Table

2011 2010 2009Equity income from investments in unconsolidatedaffiliates $ (47) $ (42) $ (36)Gain upon consolidation of a former unconsolidatedaffiliate in China(a) — — (68)Foreign exchange net (gain) loss and other (6) (1) —


(a) See Note 4 for further discussion of the consolidation of a former unconsolidatedaffiliate in Shanghai, China.



12 Months EndedDerivative Instruments(Details 2) (USD $)


Dec. 31,2011

Dec. 25,2010

Derivative Instruments, Gain (Loss) [Line Items]Net deferred loss within AOCI due to treasury locks and forward starting interest rateswaps that have been cash settled $ 12 $ 13

Interest Rate Swaps | Fair value hedging | Interest expense, netDerivative Instruments, Gain (Loss) [Line Items]Reduction to Interest Expense, net for recognized gains on interest rate swaps 24 33Foreign Currency ForwardsDerivative Instruments, Gain (Loss) [Line Items]Gains (losses) recognized into OCI, net of tax 2 32Gains (losses) reclassified from Accumulated OCI into income, net of tax $ 1 $ 33



12 Months EndedShare-based and DeferredCompensation Plans Dec. 31, 2011

Compensation Related Costs[Abstract]Share-based and DeferredCompensation Plans

Share-based and Deferred Compensation Plans

Overview

At year end 2011, we had four stock award plans in effect: the YUM! Brands, Inc. Long-TermIncentive Plan and the 1997 Long-Term Incentive Plan (collectively the “LTIPs”), the YUM!Brands, Inc. Restaurant General Manager Stock Option Plan (“RGM Plan”) and the YUM! Brands,Inc. SharePower Plan (“SharePower”). Under all our plans, the exercise price of stock options andstock appreciation rights (“SARs”) granted must be equal to or greater than the average marketprice or the ending market price of the Company’s stock on the date of grant.

Potential awards to employees and non-employee directors under the LTIPs include stock options,incentive stock options, SARs, restricted stock, stock units, restricted stock units (“RSUs”),performance restricted stock units, performance share units (“PSUs”) and performanceunits. Through December 31, 2011, we have issued only stock options, SARs, RSUs and PSUsunder the LTIPs. While awards under the LTIPs can have varying vesting provisions and exerciseperiods, outstanding awards under the LTIPs vest in periods ranging from immediate to 5 years.Stock options and SARs expire ten years after grant.

Potential awards to employees under the RGM Plan include stock options, SARs, restricted stockand RSUs. Through December 31, 2011, we have issued only stock options and SARs under thisplan. RGM Plan awards granted have a four-year cliff vesting period and expire ten years aftergrant. Certain RGM Plan awards are granted upon attainment of performance conditions in theprevious year. Expense for such awards is recognized over a period that includes the performancecondition period.

Potential awards to employees under SharePower include stock options, SARs, restricted stockand RSUs. Through December 31, 2011, we have issued only stock options and SARs under thisplan. These awards generally vest over a period of four years and expire no longer than ten yearsafter grant.

At year end 2011, approximately 19 million shares were available for future share-basedcompensation grants under the above plans.

Our Executive Income Deferral (“EID”) Plan allows participants to defer receipt of a portion oftheir annual salary and all or a portion of their incentive compensation. As defined by the EIDPlan, we credit the amounts deferred with earnings based on the investment options selected by theparticipants. These investment options are limited to cash, phantom shares of our Common Stock,phantom shares of a Stock Index Fund and phantom shares of a Bond Index Fund. Investmentsin cash and phantom shares of both index funds will be distributed in cash at a date as elected bythe employee and therefore are classified as a liability on our Consolidated Balance Sheets. Werecognize compensation expense for the appreciation or the depreciation, if any, of investments incash and both of the index funds. Deferrals into the phantom shares of our Common Stock will bedistributed in shares of our Common Stock, under the LTIPs, at a date as elected by the employeeand therefore are classified in Common Stock on our Consolidated Balance Sheets. We do notrecognize compensation expense for the appreciation or the depreciation, if any, of investments inphantom shares of our Common Stock. Our EID plan also allows participants to defer incentivecompensation to purchase phantom shares of our Common Stock and receive a 33% Companymatch on the amount deferred. Deferrals receiving a match are similar to a RSU award in thatparticipants will generally forfeit both the match and incentive compensation amounts deferred ifthey voluntarily separate from employment during a vesting period that is two years. We expense



the intrinsic value of the match and the incentive compensation over the requisite service periodwhich includes the vesting period.

Historically, the Company has repurchased shares on the open market in excess of the amountnecessary to satisfy award exercises and expects to continue to do so in 2012.

Award Valuation

We estimated the fair value of each stock option and SAR award as of the date of grant using theBlack-Scholes option-pricing model with the following weighted-average assumptions:

2011 2010 2009Risk-free interest rate 2.0% 2.4% 1.9%Expected term (years) 5.9 6.0 5.9Expected volatility 28.2% 30.0% 32.3%Expected dividendyield 2.0% 2.5% 2.6%

We believe it is appropriate to group our stock option and SAR awards into two homogeneousgroups when estimating expected term. These groups consist of grants made primarily torestaurant-level employees under the RGM Plan, which cliff-vest after four years and expireten years after grant, and grants made to executives under our other stock award plans, whichtypically have a graded vesting schedule of 25% per year over four years and expire ten yearsafter grant. We use a single weighted-average term for our awards that have a graded vestingschedule. Based on analysis of our historical exercise and post-vesting termination behavior, wehave determined that our restaurant-level employees and our executives exercised the awards onaverage after five years and six years, respectively.

When determining expected volatility, we consider both historical volatility of our stock as well asimplied volatility associated with our traded options. The expected dividend yield is based on theannual dividend yield at the time of grant.

The fair values of RSU and PSU awards are based on the closing price of our stock on the date ofgrant.

Award Activity

Stock Options and SARs

Shares(in

thousands)


Price

Weighted-Average

RemainingContractual

Term

AggregateIntrinsicValue (inmillions)

Outstanding at the beginning ofthe year 36,438 $ 26.91Granted 5,023 49.59Exercised (6,645) 20.33Forfeited or expired (1,308) 35.52Outstanding at the end of theyear 33,508 (a) $ 31.28 5.96 $ 929

Exercisable at the end of the year 18,709 $ 26.00 4.48 $ 618



(a) Outstanding awards include 8,161 options and 25,347 SARs with average exerciseprices of $21.56 and $34.41, respectively.

The weighted-average grant-date fair value of stock options and SARs granted during 2011, 2010and 2009 was $11.78, $8.21 and $7.29, respectively. The total intrinsic value of stock options andSARs exercised during the years ended December 31, 2011, December 25, 2010 and December 26,2009, was $226 million, $259 million and $217 million, respectively.

As of December 31, 2011, there was $82 million of unrecognized compensation cost relatedto stock options and SARs, which will be reduced by any forfeitures that occur, related tounvested awards that is expected to be recognized over a remaining weighted-average period ofapproximately 2.5 years. The total fair value at grant date of awards vested during 2011, 2010 and2009 was $43 million, $47 million and $52 million, respectively.

RSUs and PSUs

As of December 31, 2011, there was $10 million of unrecognized compensation cost related to 1.0million unvested RSUs and PSUs.

Impact on Net Income

The components of share-based compensation expense and the related income tax benefits areshown in the following table:



Cash received from stock option exercises for 2011, 2010 and 2009, was $59 million, $102 millionand $113 million, respectively. Tax benefits realized on our tax returns from tax deductionsassociated with stock options and SARs exercised for 2011, 2010 and 2009 totaled $72 million,$82 million and $68 million, respectively.



12 Months EndedSupplemental Balance SheetInformation (Tables) Dec. 31, 2011

Supplemental Balance Sheet Information Disclosure[Abstract]Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other CurrentAssets

20112010

Income tax receivable $ 150 $ 115Assets held for sale 24 23Other prepaid expenses and current assets 164 131

$ 338 $ 269

Property, Plant and EquipmentProperty, Plant and Equipment 2011 2010Land $ 527 $ 542Buildings and improvements 3,856 3,709Capital leases, primarily buildings 316 274Machinery and equipment 2,568 2,578Property, Plant and equipment, gross 7,267 7,103Accumulated depreciation andamortization (3,225) (3,273)


Accounts Payable and Other Current LiabilitiesAccounts Payable and Other CurrentLiabilities 2011 2010Accounts payable $ 712 $ 540Accrued capital expenditures 229 174Accrued compensation and benefits 440 357Dividends payable 131 118Accrued taxes, other than income taxes 112 95Other current liabilities 250 318

$1,874 $1,602



12 Months EndedIncome Taxes Dec. 31, 2011Income Tax Disclosure[Abstract]Income Taxes Income Taxes

U.S. and foreign income before taxes are set forth below:

2011 2010 2009U.S. $ 266 $ 345 $ 269Foreign 1,393 1,249 1,127

$ 1,659 $ 1,594 $ 1,396


2011 2010 2009Current: Federal $ 78 $ 155 $ (21)

Foreign 374 356 251State 9 15 11

$ 461 $ 526 241


(137) (110) 72$ 324 $ 416 $ 313

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to our effectivetax rate is set forth below:

2011 2010 2009U.S. federal statutory rate $ 580 35.0 % $ 558 35.0 % $ 489 35.0 %State income tax, net of federaltax benefit 2 0.1 12 0.7 14 1.0Statutory rate differentialattributable to foreignoperations (218) (13.1) (235) (14.7) (159) (11.4)Adjustments to reserves andprior years 24 1.4 55 3.5 (9) (0.6)Net benefit from LJS andA&W divestitures (72) (4.3) — — — —Change in valuation allowances 22 1.3 22 1.4 (9) (0.7)Other, net (14) (0.9) 4 0.2 (13) (0.9)




Statutory rate differential attributable to foreign operations. This item includes local taxes,withholding taxes, and shareholder-level taxes, net of foreign tax credits. The favorable impact isprimarily attributable to a majority of our income being earned outside of the U.S. where tax ratesare generally lower than the U.S. rate.

In 2011 and 2010, the benefit was positively impacted by the recognition of excess foreign taxcredits generated by our intent to repatriate current year foreign earnings.

In 2009, the benefit was negatively impacted by withholding taxes associated with the distributionof intercompany dividends that were only partially offset by related foreign tax credits generatedduring the year.

Adjustments to reserves and prior years. This item includes: (1) the effects of reconciling incometax amounts recorded in our Consolidated Statements of Income to amounts reflected on our taxreturns, including any adjustments to the Consolidated Balance Sheets; and (2) changes in taxreserves, including interest thereon, established for potential exposure we may incur if a taxingauthority takes a position on a matter contrary to our position. We evaluate these amounts on aquarterly basis to insure that they have been appropriately adjusted for audit settlements and otherevents we believe may impact the outcome. The impact of certain effects or changes may offsetitems reflected in the ‘Statutory rate differential attributable to foreign operations’ line.

In 2009, this item included out-of-year adjustments which lowered our effective tax rate by 1.6percentage points.

Change in valuation allowance. This item relates to changes for deferred tax assets generated orutilized during the current year and changes in our judgment regarding the likelihood of usingdeferred tax assets that existed at the beginning of the year. The impact of certain changes mayoffset items reflected in the ‘Statutory rate differential attributable to foreign operations’ line. TheCompany considers all available positive and negative evidence, including the amount of taxableincome and periods over which it must be earned, actual levels of past taxable income and knowntrends and events or transactions expected to affect future levels of taxable income.

In 2011, $22 million of net tax expense was driven by $15 million for valuation allowancesrecorded against deferred tax assets generated during the current year and $7 million of tax expenseresulting from a change in judgment regarding the future use of certain foreign deferred tax assetsthat existed at the beginning of the year. These amounts exclude $45 million in valuation allowanceadditions related to capital losses recognized as a result of the LJS and A&W divestitures, whichare presented within Net Benefit from LJS and A&W divestitures.

In 2010, the $22 million of net tax expense was driven by $25 million for valuation allowancesrecorded against deferred tax assets generated during the current year. This expense was partiallyoffset by a $3 million tax benefit resulting from a change in judgment regarding the future use ofU.S. state deferred tax assets that existed at the beginning of the year.

In 2009, the $9 million net tax benefit was driven by $25 million of benefit resulting from a changein judgment regarding the future use of foreign deferred tax assets that existed at the beginning ofthe year. This benefit was partially offset by $16 million for valuation allowances recorded againstdeferred tax assets generated during the year.

Net benefit from LJS and A&W divestitures. This item includes a one-time $117 million tax benefit,including approximately $8 million state benefit, recognized on the LJS and A&W divestitures in2011, partially offset by $45 million of valuation allowance, including approximately $4 millionstate expense, related to capital loss carryforwards recognized as a result of the divestitures. Inaddition, we recorded $32 million of tax benefits on $86 million of pre-tax losses and other costs,which resulted in $104 million of total net tax benefits related to the divestitures.

Other. This item primarily includes the impact of permanent differences related to current yearearnings and U.S. tax credits.



In 2009, this item was positively impacted by a one-time pre-tax gain of approximately $68million, with no related income tax expense, recognized on our acquisition of additional interestin, and consolidation of, the entity that operates KFC in Shanghai, China. This was partiallyoffset by a pre-tax U.S. goodwill impairment charge of approximately $26 million, with norelated income tax benefit.


2011 2010Operating losses and tax credit carryforwards $ 590 $ 335Employee benefits 259 171Share-based compensation 106 102Self-insured casualty claims 47 50Lease-related liabilities 137 166Various liabilities 72 89Deferred income and other 49 97






$ 600 $ 356

We have investments in foreign subsidiaries where the carrying values for financial reportingexceed the tax basis. We have not provided deferred tax on the portion of the excess that webelieve is essentially permanent in duration. This amount may become taxable upon an actual ordeemed repatriation of assets from the subsidiaries or a sale or liquidation of the subsidiaries. Weestimate that our total temporary difference upon which we have not provided deferred tax isapproximately $1.7 billion at December 31, 2011. A determination of the deferred tax liability onthis amount is not practicable.

At December 31, 2011, the Company has foreign operating and capital loss carryforwards of $1.0billion and U.S. federal and state operating loss and tax credit carryforwards of $2.0 billion. Theselosses are being carried forward in jurisdictions where we are permitted to use tax losses from priorperiods to reduce future taxable income and will expire as follows:





$ 26 $ 258 $ 1,906 $ 838 $ 3,028

We recognize the benefit of positions taken or expected to be taken in tax returns in the financialstatements when it is more likely than not that the position would be sustained upon examinationby tax authorities. A recognized tax position is measured at the largest amount of benefit that isgreater than fifty percent likely of being realized upon settlement.

The Company had $348 million and $308 million of unrecognized tax benefits at December 31,2011 and December 25, 2010, respectively, $197 million and $227 million of which, if recognized,would affect the 2011 and 2010 effective income tax rates, respectively. A reconciliation of thebeginning and ending amount of unrecognized tax benefits follows:



End of Year $ 348 $ 308

The Company believes it is reasonably possible its unrecognized tax benefits may decrease byapproximately $89 million in the next twelve months, including approximately $39 million which,if recognized upon audit settlement or statute expiration, would affect the 2012 effective tax rate.Each position is individually insignificant.

The Company’s income tax returns are subject to examination in the U.S. federal jurisdiction andnumerous foreign jurisdictions. The following table summarizes our major jurisdictions and thetax years that are either currently under audit or remain open and subject to examination:

Jurisdiction Open Tax YearsU.S. Federal 2004 – 2011China 2008 – 2011United Kingdom 2003 – 2011Mexico 2005 – 2011Australia 2007 – 2011

In addition, the Company is subject to various U.S. state income tax examinations, for which, inthe aggregate, we had significant unrecognized tax benefits at December 31, 2011, each of whichis individually insignificant.

The accrued interest and penalties related to income taxes at December 31, 2011 and December 25,2010 are set forth below:




During 2011, 2010 and 2009, a net benefit of $2 million, expense of $13 million and expense of$6 million, respectively, for interest and penalties was recognized in our Consolidated Statementsof Income as components of its income tax provision.

On June 23, 2010, the Company received a Revenue Agent Report from the Internal RevenueService (the “IRS”) relating to its examination of our U.S. federal income tax returns for fiscalyears 2004 through 2006. The IRS has proposed an adjustment to increase the taxable valueof rights to intangibles used outside the U.S. that YUM transferred to certain of its foreignsubsidiaries. The proposed adjustment would result in approximately $700 million of additionaltaxes plus net interest to date of approximately $170 million. Furthermore, if the IRS prevails itis likely to make similar claims for years subsequent to fiscal 2006. The potential additional taxesfor these later years, through 2011, computed on a similar basis to the 2004-2006 additional taxes,would be approximately $350 million plus net interest to date of approximately $25 million.

We believe that the Company has properly reported taxable income and paid taxes in accordancewith applicable laws and that the proposed adjustment is inconsistent with applicable income taxlaws, Treasury Regulations and relevant case law. We intend to defend our position vigorouslyand have filed a protest with the IRS. As the final resolution of the proposed adjustment remainsuncertain, the Company will continue to provide for its position in this matter based on the taxbenefit that we believe is the largest amount that is more likely than not to be realized uponsettlement of this issue. There can be no assurance that payments due upon final resolution ofthis issue will not exceed our currently recorded reserve and such payments could have a materialadverse effect on our financial position. Additionally, if increases to our reserves are deemednecessary due to future developments related to this issue, such increases could have a material,adverse effect on our results of operations as they are recorded. The Company does not expectresolution of this matter within twelve months and cannot predict with certainty the timing of suchresolution.



12 Months EndedShare-based and DeferredCompensation Plans

(Details) (USD $)In Millions, except Share

data, unless otherwisespecified

Dec. 31, 2011Years

groupsplans

Dec. 25,2010Years

Dec. 26,2009Years

Share-based Compensation Arrangement by Share-based PaymentAward [Line Items]Number of stock award plans in effect 4Approximate number of shares available for grant (in shares) 19,000,000Weighted-average assumptions used in the Black-Scholes option-pricing model [Abstract]Risk-free interest rate (in hundredths) 2.00% 2.40% 1.90%Expected term (years) 5.9 6.0 5.9Expected volatility (in hundredths) 28.20% 30.00% 32.30%Expected dividend yield (in hundredths) 2.00% 2.50% 2.60%Number of homogeneous groups appropriate to group awards into whenestimating expected term 2

Graded vesting schedule of grants made to executives under other stockaward plans

25% peryear

Average number of years after which restaurant-level employees exercisedstock awards 5 years

Average number of years after which executives exercised stock awards 6 yearsSummary of award activity - Stock options and SARs, additionaldisclosures [Abstract]Options outstanding at the end of the year (in shares) 8,161,000SARs outstanding at the end of the year (in shares) 25,347,000Options outstanding at the end of the year, Weighted-average exercise price(in dollars per share) $ 21.56

SARs outstanding at the end of the year, Weighted-average exercise price(in dollars per share) $ 34.41

Impact on net income [Abstract]Allocated Share-based Compensation Expense $ 59 $ 47 $ 56Deferred Tax Benefit recognized 18 13 17EID compensation expense not share-based 2 4 4Cash received from stock options exercises 59 102 113Tax benefit realized on tax returns from tax deductions associated withstock options and SARs exercised 72 82 68

Restricted Stock Units and Performance Share Units [Member]Summary of award activity - Stock options and SARs, additionaldisclosures [Abstract]Unrecognized compensation cost 10Unvested RSUs and PSUs 1,000,000Stock Options and Stock Appreciation Rights [Member]Summary of award activity - Stock options and SARs [Roll Forward]



Outstanding at the beginning of the year (in shares) 36,438,000Granted (in shares) 5,023,000Exercised (in shares) (6,645,000)Forfeited or expired (in shares) (1,308,000)Outstanding at the end of the year (in shares) 33,508,000 [1] 36,438,000Summary of award activity - Stock options and SARs, additionaldisclosures [Abstract]Outstanding at the beginning of the year, Weighted-average exercise price(in dollars per share) $ 26.91

Granted, Weighted-average exercise price (in dollars per share) $ 49.59Exercised, Weighted-average exercise price (in dollars per share) $ 20.33Forfeited or expired, Weighted-average exercise price (in dollars per share) $ 35.52Outstanding at the end of the year, Weighted-average exercise price (indollars per share) $ 31.28 $ 26.91

Outstanding at the end of the year, Weighted-average remaining contractualterm (in years) 5.96

Outstanding at the end of the year, Aggregate intrinsic value (in dollars) 929Exercisable at the end of the year (in shares) 18,709,000Exercisable at the end of the year, Weighted-average exercise price (indollars per share) $ 26.00

Exercisable at the end of the year, Weighted-average remaining contractualterm (in years) 4.48

Exercisable at the end of the year, Aggregate intrinsic value (in dollars) 618Weighted-average grant-date fair value of awards granted (in dollars pershare) $ 11.78 $ 8.21 $ 7.29

Total intrinsic value of stock options and SARs exercised 226 259 217Unrecognized compensation cost 82Unrecognized compensation cost, weighted-average period of recognition(in years) 2.5

Total fair value at grant date of awards vested 43 47 52Impact on net income [Abstract]Allocated Share-based Compensation Expense 49 40 48Restricted Stock Units (RSUs) [Member]Impact on net income [Abstract]Allocated Share-based Compensation Expense 5 5 7Performance Share Units [Member]Impact on net income [Abstract]Allocated Share-based Compensation Expense $ 5 $ 2 $ 1Long Term Incentive Plans [Member]Share-based Compensation Arrangement by Share-based PaymentAward [Line Items]Minimum vesting period of outstanding awards (in years) immediateMaximum vesting period of outstanding awards (in years) 5 yearsPeriod after grant when outstanding awards expire (in years) 10 yearsRestaurant General Manager Stock Option Plan [Member]



Share-based Compensation Arrangement by Share-based PaymentAward [Line Items]Period after grant when outstanding awards expire (in years) 10 yearsVesting period (in years) 4 yearsSharePower Plan [Member]Share-based Compensation Arrangement by Share-based PaymentAward [Line Items]Period after grant when outstanding awards expire (in years) 10 yearsVesting period (in years) 4 yearsExecutive Income Deferral Plan [Member]Share-based Compensation Arrangement by Share-based PaymentAward [Line Items]Percentage of Company match on amount deferred (in hundredths) 33.00%Vesting period of deferred incentive compensation receiving Companymatch (in years) 2 years

[1] Outstanding awards include 8,161 options and 25,347 SARs with average exercise prices of $21.56 and$34.41, respectively.



Consolidated Statements ofShareholders' Equity

(Deficit) and ComprehensiveIncome (Loss) (USD $)

In Millions, except Sharedata

Total CommonStock

RetainedEarnings

Accumulated OtherComprehensiveIncome (Loss)

NoncontrollingInterest

Balance at Dec. 27, 2008 $ (94) $ 7 $ 303 $ (418) $ 14Balance (in shares) at Dec. 27,2008 459,000,000

Net Income 1,083 1,071 12Foreign currency translationadjustment 176 176

Pension and post-retirementbenefit plans (net of tax impact) 13 13

Net unrealized gain (loss) onderivative instruments (net of taximpact)

5 5

Net unrealized change inderivative instruments (taximpact)

(3)

Comprehensive Income 1,277Purchase of subsidiary sharesfrom noncontrolling interest 70 70

Dividends declared (385) (378) (7)Repurchase of shares ofCommon Stock 0 0

Repurchase of shares ofCommon Stock (in shares) 0

Employee stock option andSARs exercises (includes taximpact)

168 168

Employee stock option andSARs exercises (includes taximpact) (in shares)

10,000,000

Compensation-related events(includes tax impact) 78 78

Compensation-related events(includes tax impact) (in shares) 0

Balance at Dec. 26, 2009 1,114 253 996 (224) 89Balance (in shares) at Dec. 26,2009 469,000,000

Net Income 1,178 1,158 20Foreign currency translationadjustment 12 8 4

Pension and post-retirementbenefit plans (net of tax impact) (10) (10)




(1) (1)


1

Comprehensive Income 1,179Dividends declared (457) (437) (20)Repurchase of shares ofCommon Stock (390) [1] (390) 0

Repurchase of shares ofCommon Stock (in shares) (9,759,000) [1] (10,000,000)


168 168


9,000,000


Compensation-related events(includes tax impact) (in shares) 1,000,000

Balance at Dec. 25, 2010 1,669 86 1,717 (227) 93Balance (in shares) at Dec. 25,2010 469,000,000

Net Income 1,335 1,319 16Foreign currency translationadjustment 91 85 6

Pension and post-retirementbenefit plans (net of tax impact) (106) (106)


1 1


(1)

Comprehensive Income 1,321Dividends declared (523) (501) (22)Repurchase of shares ofCommon Stock (733) [1] (250) (483)

Repurchase of shares ofCommon Stock (in shares) (14,305,000) [1] (14,000,000)


119 119




5,000,000


Compensation-related events(includes tax impact) (in shares) 0

Balance at Dec. 31, 2011 $ 1,916 $ 18 $ 2,052 $ (247) $ 93Balance (in shares) at Dec. 31,2011 460,000,000

[1] 2011 amount excludes and 2010 amount includes the effect of $19 million in share repurchases (0.4 millionshares) with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010fiscal year.



12 Months EndedConsolidated Statements ofShareholders' Equity

(Deficit) and ComprehensiveIncome (Loss)

(Parenthetical) (USD $)In Millions, unless otherwise

specified

Dec. 31, 2011Dec. 25, 2010 Dec. 26, 2009

Statement of Stockholders' Equity [Abstract]Compensation-related events (tax impact) $ (5) $ (7) $ (2)Net unrealized change in derivative instruments (tax impact) (1) 1 (3)Pension and post-retirement benefit plans (tax impact) 65 7 (9)Employee stock option and SARs exercises (tax impact) $ (71) $ (73) $ (57)



12 Months EndedShort-term Borrowings andLong-term Debt Dec. 31, 2011

Debt Disclosure [Abstract]Short-term Borrowings andLong-term Debt

Short-term Borrowings and Long-term Debt

2011 2010Short-term BorrowingsCurrent maturities of long-term debt $ 315 $ 668Current portion of fair value hedge accounting adjustment (See Note 12) 5 5Unsecured International Revolving Credit Facility, expires November2012

— —

Unsecured Revolving Credit Facility, expires November 2012 — —$ 320 $ 673


3,291 3,557Less current maturities of long-term debt (315) (668)Long-term debt excluding long-term portion of hedge accountingadjustment 2,976 2,889Long-term portion of fair value hedge accounting adjustment (See Note12) 21 26


Our primary bank credit agreement comprises a $1.15 billion syndicated senior unsecuredrevolving credit facility (the “Credit Facility”) which matures in November 2012 and includes24 participating banks with commitments ranging from $20 million to $93 million. Under theterms of the Credit Facility, we may borrow up to the maximum borrowing limit, less outstandingletters of credit or banker’s acceptances, where applicable. At December 31, 2011, our unusedCredit Facility totaled $727 million net of outstanding letters of credit of $423 million. Therewere no borrowings outstanding under the Credit Facility at December 31, 2011. The interest ratefor borrowings under the Credit Facility ranges from 0.25% to 1.25% over the London InterbankOffered Rate (“LIBOR”) or is determined by an Alternate Base Rate, which is the greater of thePrime Rate or the Federal Funds Rate plus 0.50%. The exact spread over LIBOR or the AlternateBase Rate, as applicable, depends on our performance under specified financial criteria. Intereston any outstanding borrowings under the Credit Facility is payable at least quarterly.

We also have a $350 million, syndicated revolving International credit facility (the “ICF”) whichmatures in November 2012 and includes 6 banks with commitments ranging from $35 millionto $90 million. There was available credit of $350 million and no borrowings outstanding underthe ICF at the end of 2011. The interest rate for borrowings under the ICF ranges from 0.31%to 1.50% over LIBOR or is determined by a Canadian Alternate Base Rate, which is the greaterof the Citibank, N.A., Canadian Branch’s publicly announced reference rate or the “CanadianDollar Offered Rate” plus 0.50%. The exact spread over LIBOR or the Canadian Alternate BaseRate, as applicable, depends on our performance under specified financial criteria. Interest on anyoutstanding borrowings under the ICF is payable at least quarterly.



The Credit Facility and the ICF are unconditionally guaranteed by our principal domesticsubsidiaries. Additionally, the ICF is unconditionally guaranteed by YUM. These agreementscontain financial covenants relating to maintenance of leverage and fixed charge coverage ratiosand also contain affirmative and negative covenants including, among other things, limitationson certain additional indebtedness and liens, and certain other transactions specified in theagreement. Given the Company’s balance sheet and cash flows, we were able to comply with alldebt covenant requirements at December 31, 2011 with a considerable amount of cushion.

We are in the process of renewing the Credit Facility and ICF.

The majority of our remaining long-term debt primarily comprises Senior Unsecured Notes withvarying maturity dates from 2012 through 2037 and stated interest rates ranging from 2.38% to7.70%. The Senior Unsecured Notes represent senior, unsecured obligations and rank equally inright of payment with all of our existing and future unsecured unsubordinated indebtedness.

In the fourth quarter of 2011, we issued Chinese Yuan Renminbi 350 million ($56 million)aggregate principal amount 2.38% Senior Unsecured Notes that are due September 29, 2014.During the third quarter of 2011, we issued $350 million aggregate principal amount of 3.75% 10year Senior Unsecured Notes. During the second quarter of 2011 we repaid $650 million of SeniorUnsecured Notes upon their maturity primarily with existing cash on hand.

The following table summarizes all Senior Unsecured Notes issued that remain outstanding atDecember 31, 2011:

Interest Rate

Issuance Date(a) Maturity Date

PrincipalAmount (in




(b) Includes the effects of the amortization of any (1) premium or discount; (2) debt issuancecosts; and (3) gain or loss upon settlement of related treasury locks and forward-startinginterest rate swaps utilized to hedge the interest rate risk prior to the debtissuance. Excludes the effect of any swaps that remain outstanding as described in Note12.

Both the Credit Facility and the ICF contain cross-default provisions whereby our failure to makeany payment on any of our indebtedness in a principal amount in excess of $100 million, orthe acceleration of the maturity of any such indebtedness, will constitute a default under suchagreement. Our Senior Unsecured Notes provide that the acceleration of the maturity of any ofour indebtedness in a principal amount in excess of $50 million will constitute a default underthe Senior Unsecured Notes if such acceleration is not annulled, or such indebtedness is notdischarged, within 30 days after notice.



The annual maturities of short-term borrowings and long-term debt as of December 31, 2011,excluding capital lease obligations of $279 million and fair value hedge accounting adjustments of$26 million, are as follows:


Total $ 3,019

Interest expense on short-term borrowings and long-term debt was $184 million, $195 million and$212 million in 2011, 2010 and 2009, respectively.



12 Months EndedDocument and EntityInformation (USD $) Dec. 31, 2011 Feb. 14, 2012 Jun. 11, 2011

Document And Entity Information [Abstract]Entity Registrant Name YUM BRANDS INCDocument Type 10-KAmendment Flag falseDocument Period End Date Dec. 31, 2011Entity Central Index Key 0001041061Current Fiscal Year End Date --12-31Entity Well-known Seasoned Issuer YesEntity Voluntary Filers NoEntity Current Reporting Status YesEntity Filer Category Large Accelerated FilerEntity Public Float $ 24,430,261,521Entity Common Stock, Shares Outstanding 460,414,239Document Fiscal Year Focus 2011Document Fiscal Period Focus FY



12 Months EndedLeases Dec. 31, 2011Leases [Abstract]Leases Leases

At December 31, 2011 we operated more than 7,400 restaurants, leasing the underlying land and/or building in nearly 6,200 of those restaurants with the vast majority of our commitments expiringwithin 20 years from the inception of the lease. Our longest lease expires in 2151. We alsolease office space for headquarters and support functions, as well as certain office and restaurantequipment. We do not consider any of these individual leases material to our operations. Mostleases require us to pay related executory costs, which include property taxes, maintenance andinsurance.

Future minimum commitments and amounts to be received as lessor or sublessor under non-cancelable leases are set forth below:




$ 437 $ 5,337 $ 25 $ 335

At December 31, 2011 and December 25, 2010, the present value of minimum payments undercapital leases was $279 million and $236 million, respectively. At December 31, 2011, unearnedincome associated with direct financing lease receivables was $14 million.

The details of rental expense and income are set forth below:


$ 858 $ 723 $ 664




3 Months Ended 12 Months EndedSubsequent Event (Details)(Little Sheep Group Limited

[Member], USD $)In Millions, unless otherwise

specified

Mar. 24, 2012 Dec. 26, 2009

Little Sheep Group Limited [Member]Schedule of Equity Method Investments [Line Items]Amount paid to acquire an additional ownership percentage $ 584 $ 103



12 Months EndedConsolidated Statements ofIncome (USD $)


specified

Dec. 31, 2011 Dec. 25, 2010 Dec. 26, 2009

RevenuesCompany sales $

10,893$9,783

$9,413

Franchise and license fees and income 1,733 1,560 1,423Total revenues 12,626 11,343 10,836Company restaurantsFood and paper 3,633 3,091 3,003Payroll and employee benefits 2,418 2,172 2,154Occupancy and other operating expenses 3,089 2,857 2,777Company restaurant expenses 9,140 8,120 7,934General and administrative expenses 1,372 1,277 1,221Franchise and license expenses 145 110 118Closures and impairment (income) expenses 135 47 103Refranchising (gain) loss 72 [1],[2] 63 [1],[3],[4] (26) [3]

Other (income) expense (53) (43) (104)Total costs and expenses, net 10,811 9,574 9,246Operating Profit 1,815 [5],[6],[7],[8],[9] 1,769 [10],[5],[7],[9] 1,590 [11],[7],[8],[9]

Interest expense, net 156 175 194Income Before Income Taxes 1,659 [5],[7],[8],[9] 1,594 [5],[7],[9] 1,396 [11],[7],[8],[9]

Income tax provision 324 416 313Net Income - including noncontrolling interest 1,335 1,178 1,083Net Income - noncontrolling interest 16 20 12Net Income - YUM! Brands, Inc. $

1,319$1,158

$1,071

Basic Earnings Per Common Share (in dollars pershare) $ 2.81 $ 2.44 $ 2.28

Diluted Earnings Per Common Share (in dollarsper share) $ 2.74 $ 2.38 $ 2.22

Dividends Declared Per Common Share (in dollarsper share) $ 1.07 $ 0.92 $ 0.80

[1] U.S. refranchising losses in the years ended December 31, 2011 and December 25, 2010 are primarily dueto losses on sales of and offers to refranchise KFCs in the U.S. There were approximately 250 and 600 KFCrestaurants offered for refranchising as of December 31, 2011 and December 25, 2010, respectively. Whilewe did not yet believe these KFCs met the criteria to be classified as held for sale, we did, consistent withour historical practice, review the restaurants for impairment as a result of our offer to refranchise. Werecorded impairment charges where we determined that the carrying value of restaurant groups to be soldwas not recoverable based upon our estimate of expected refranchising proceeds and holding period cashflows anticipated while we continue to operate the restaurants as company units. For those restaurantgroups deemed impaired, we wrote such restaurant groups down to our estimate of their fair values, which



were based on the sales price we would expect to receive from a franchisee for each restaurant group. Thisfair value determination considered current market conditions, real-estate values, trends in the KFC U.S.business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurantgroups to date. The non-cash impairment charges that were recorded related to our offers to refranchisethese company-operated KFC restaurants in the U.S. decreased depreciation expense versus what wouldhave otherwise been recorded by $10 million and $9 million in the years ended December 31, 2011 andDecember 25, 2010, respectively. These depreciation reductions were not allocated to the U.S. segmentresulting in depreciation expense in the U.S. segment results continuing to be recorded at the rate at whichit was prior to the impairment charges being recorded for these restaurants. We will continue to review therestaurant groups for any further necessary impairment until the date they are sold. The aforementionednon-cash impairment charges do not include any allocation of the KFC reporting unit goodwill in therestaurant group carrying value. This additional non-cash write-down would be recorded, consistent withour historical policy, if the restaurant groups, or any subset of the restaurant groups, ultimately meet thecriteria to be classified as held for sale. We will also be required to record a charge for the fair value of ourguarantee of future lease payments for leases we assign to the franchisee upon any sale.

[2] During the year ended December 31, 2011 we decided to refranchise or close all of our remainingCompany-operated Pizza Hut restaurants in the UK market. While an asset group comprisingapproximately 350 dine-in restaurants did not meet the criteria for held-for-sale classification as ofDecember 31, 2011, ourdecision to sell was considered an impairment indicator. As such we reviewed thisasset group for potential impairment and determined that its carrying value was not recoverable based uponour estimate of expected refranchising proceeds and holding period cash flows anticipated while wecontinue to operate the restaurants as company units. Accordingly, we wrote this asset group down to ourestimate of its fair value, which is based on the sales price we would expect to receive from a buyer. Thisfair value determination considered current market conditions, trends in the Pizza Hut UK business, andprices for similar transactions in the restaurant industry and resulted in a non-cash pre-tax write-down of$74 million which was recorded to Refranchising (gain) loss. This impairment charge decreaseddepreciation expense versus what would have otherwise been recorded by $3 million in 2011. Thisdepreciation reduction was not allocated to the YRI segment, resulting in depreciation expense in the YRIsegment results continuing to be recorded at the rate at which it was prior to the impairment charges beingrecorded for these restaurants. We will continue to review the asset group for any further necessaryimpairment until the date it is sold. The write-down does not include any allocation of the Pizza Hut UKreporting unit goodwill in the asset group carrying value. This additional non-cash write-down would berecorded, consistent with our historical policy, if the asset group ultimately meets the criteria to beclassified as held for sale. Upon the ultimate sale of the restaurants, depending on the form of thetransaction, we could also be required to record a charge for the fair value of any guarantee of future leasepayments for any leases we assign to a franchisee and for the cumulative foreign currency translationadjustment associated with Pizza Hut UK. The decision to refranchise or close all remaining Pizza Hutrestaurants in the UK was considered to be a goodwill impairment indicator. We determined that the fairvalue of our Pizza Hut UK reporting unit exceeded its carrying value and as such there was no impairmentof the approximately $100 million in goodwill attributable to the reporting unit.

[3] During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as aresult of our decision to offer to refranchise our KFC Taiwan equity market. During the year endedDecember 25, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consistedof 124 KFCs. We included in our December 25, 2010 financial statements a non-cash write-off of $7million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in arelated income tax benefit. The amount of goodwill write-off was based on the relative fair values of theTaiwan business disposed of and the portion of the business that was retained. The fair value of the businessdisposed of was determined by reference to the discounted value of the future cash flows expected to be



generated by the restaurants and retained by the franchisee, which include a deduction for the anticipatedroyalties the franchisee will pay the Company associated with the franchise agreement entered into inconnection with this refranchising transaction. The fair value of the Taiwan business retained consists ofexpected, net cash flows to be derived from royalties from franchisees, including the royalties associatedwith the franchise agreement entered into in connection with this refranchising transaction. We believe theterms of the franchise agreement entered into in connection with the Taiwan refranchising are substantiallyconsistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30million, after the aforementioned write-off, was determined not to be impaired as the fair value of theTaiwan reporting unit exceeded its carrying amount.

[4] In the year ended December 25, 2010 we recorded a $52 million loss on the refranchising of our Mexicoequity market as we sold all of our Company-owned restaurants, comprised of 222 KFCs and 123 PizzaHuts, to an existing Latin American franchise partner. The buyer is serving as the master franchisee forMexico which had 102 KFC and 53 Pizza Hut franchise restaurants at the time of the transaction. Thewrite-off of goodwill included in this loss was minimal as our Mexico reporting unit included aninsignificant amount of goodwill. This loss did not result in any related income tax benefit.

[5] 2011 and 2010 include depreciation reductions arising from the impairment of KFC restaurants we offeredto sell of $10 million and $9 million, respectively. 2011 includes a depreciation reduction arising from theimpairment of Pizza Hut UK restaurants we decided to sell in 2011 of $3 million. See Note 4.

[6] Includes net losses of $65 million primarily related to the LJS and A&W divestitures, $88 million primarilyrelated to refranchising international markets and $28 million primarily related to the U.S. businesstransformation measures and U.S. refranchising in the first, third and fourth quarters of 2011, respectively.See Note 4. The fourth quarter of 2011 also includes the $25 million impact of the 53rd week. See Note 2.

[7] 2011, 2010 and 2009 include approximately $21 million, $9 million and $16 million, respectively, ofcharges relating to U.S. general and administrative productivity initiatives and realignment of resources.See Note 4.

[8] 2011 represents net losses resulting from the LJS and A&W divestitures. 2009 includes a $26 millioncharge to write-off goodwill associated with our LJS and A&W businesses in the U.S. See Note 9.

[9] Includes equity income from investments in unconsolidated affiliates of $47 million, $42 million and $36million in 2011, 2010 and 2009, respectively, for China.

[10] Includes net losses of $66 million and $19 million in the first and fourth quarters of 2010, respectively,related primarily to the U.S. business transformation measures and refranchising international markets. SeeNote 4.

[11] 2009 includes a $68 million gain related to the acquisition of additional interest in and consolidation of aformer unconsolidated affiliate in China. See Note 4.



12 Months EndedSupplemental Cash FlowData Dec. 31, 2011

Supplemental Cash Flow Elements[Abstract]Supplemental Cash Flow Data Supplemental Cash Flow Data

2011 2010 2009Cash Paid For:

Interest $ 199 $ 190 $ 209Income taxes 349 357 308

Significant Non-Cash Investing and FinancingActivities:

Capital lease obligations incurred $ 58 $ 16 $ 7Increase (decrease) in accrued capitalexpenditures 55 51 (17)



12 Months EndedItems AffectingComparability of Net

Income and Cash Flows Dec. 31, 2011

Items AffectingComparability Of NetIncome And Cash FlowsDisclosure [Abstract]Items Affecting Comparabilityof Net Income and Cash Flows

Items Affecting Comparability of Net Income and Cash Flows


As part of our plan to transform our U.S. business we took several measures in 2011, 2010 and 2009 ("the U.S. businesstransformation measures"). These measures include: continuation of our U.S. refranchising; General and Administrative("G&A") productivity initiatives and realignment of resources (primarily severance and early retirement costs); andinvestments in our U.S. Brands made on behalf of our franchisees such as equipment purchases.

For information on our U.S. refranchising, see the Refranchising (Gain) Loss section on pages 63 and 64.

In connection with our G&A productivity initiatives and realignment of resources (primarily severance and early retirementcosts), we recorded pre-tax charges of $21 million, $9 million and $16 million in the years ended December 31, 2011,December 25, 2010 and December 26, 2009, respectively. The unpaid current liability for the severance portion of thesecharges was $18 million and $1 million as of December 31, 2011 and December 25, 2010, respectively. Severance paymentsin the years ended December 31, 2011, December 25, 2010 and December 26, 2009 totaled approximately $4 million, $7million and $26 million, respectively.

Additionally, the Company recognized a reduction to Franchise and license fees and income of $32 million in the year endedDecember 26, 2009 related to investments in our U.S. Brands. These investments reflected our reimbursements to KFCfranchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken. The reimbursements wererecorded as a reduction to Franchise and license fees and income as we would not have provided the reimbursements absentthe ongoing franchise relationship.

As a result of a decline in future profit expectations for our LJS and A&W U.S. businesses due in part to the impact of areduced emphasis on multi-branding, we recorded a non-cash charge of $26 million, which resulted in no related income taxbenefit, in the fourth quarter of 2009 to write-off goodwill associated with our LJS and A&W U.S. businesses we owned atthe time.

We are not including the impacts of these U.S. business transformation measures in our U.S. segment for performancereporting purposes as we do not believe they are indicative of our ongoing operations. Additionally, we are not includingthe depreciation reduction of $10 million and $9 million for the years ended December 31, 2011 and December 25, 2010,respectively, arising from the impairment of the KFCs offered for sale in the year ended December 25, 2010 within ourU.S. segment for performance reporting purposes. Rather, we are recording such reduction as a credit within unallocatedOccupancy and other operating expenses resulting in depreciation expense for the impaired restaurants we continue to ownbeing recorded in the U.S. segment at the rate at which it was prior to the impairment charge being recorded.


During the fourth quarter of 2011 we sold the Long John Silver's and A&W All American Food Restaurants brands to keyfranchise leaders and strategic investors in separate transactions.

We recognized $86 million of pre-tax losses and other costs primarily in Closures and impairment (income) expenses during2011 as a result of these transactions. Additionally, we recognized $104 million of tax benefits related to tax losses associatedwith the transactions.

We are not including the pre-tax losses and other costs in our U.S. and YRI segments for performance reporting purposesas we do not believe they are indicative of our ongoing operations. In 2011, these businesses contributed 5% and 1% toFranchise and license fees and income for the U.S. and YRI segments, respectively. While these businesses contributed1% to both the U.S. and YRI segments' Operating Profit in 2011, the impact on our consolidated Operating Profit was notsignificant.


On May 4, 2009 we acquired an additional 7% ownership in the entity that operates more than 200 KFCs in Shanghai, Chinafor $12 million, increasing our ownership to 58%. The acquisition was driven by our desire to increase our managementcontrol over the entity and further integrate the business with the remainder of our KFC operations in China. Prior to ouracquisition of this additional interest, this entity was accounted for as an unconsolidated affiliate under the equity methodof accounting due to the effective participation of our partners in the significant decisions of the entity that were madein the ordinary course of business. Concurrent with the acquisition we received additional rights in the governance of the



entity, and thus we began consolidating the entity upon acquisition. As required by GAAP, we remeasured our previouslyheld 51% ownership in the entity, which had a recorded value of $17 million at the date of acquisition, at fair value andrecognized a gain of $68 million accordingly. This gain, which resulted in no related income tax expense, was recorded inOther (income) expense on our Consolidated Statement of Income during 2009 and was not allocated to any segment forperformance reporting purposes.

Under the equity method of accounting, we previously reported our 51% share of the net income of the unconsolidatedaffiliate (after interest expense and income taxes) as Other (income) expense in the Consolidated Statements of Income. Wealso recorded a franchise fee for the royalty received from the stores owned by the unconsolidated affiliate. From the dateof the acquisition, we have reported the results of operations for the entity in the appropriate line items of our ConsolidatedStatements of Income. We no longer recorded franchise fee income for these restaurants nor did we report Other (income)expense as we did under the equity method of accounting. Net income attributable to our partner’s ownership percentage isrecorded in Net Income – noncontrolling interests. For the year ended December 25, 2010, the consolidation of the existingrestaurants upon acquisition increased Company sales by $98 million, decreased Franchise and license fees and incomeby $6 million and increased Operating Profit by $3 million versus the year ended December 26, 2009. The impact of theacquisition on Net Income – YUM! Brands, Inc. was not significant to the year ended December 25, 2010.

The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2009 wouldnot have been significant.

Little Sheep Initial Investment and Pending Acquisition

During 2009, our China Division paid approximately $103 million, in several tranches, to purchase 27% of the outstandingcommon shares of Little Sheep and obtain Board of Directors representation. We began reporting our investment in LittleSheep using the equity method of accounting, and this investment is included in Investments in unconsolidated affiliates onour Consolidated Balance Sheets. Equity income recognized from our investment in Little Sheep was not significant in theyears ended December 31, 2011, December 25, 2010 or December 26, 2009.

In May 2011, we announced our intent to acquire an additional 66% controlling interest in Little Sheep. As a result, weplaced $300 million in escrow and provided a $300 million letter of credit to demonstrate availability of funds to acquire theadditional shares in this business. The funds placed in escrow were restricted to the pending acquisition of Little Sheep andare separately presented in our Consolidated Balance Sheet as of December 31, 2011 and in our Consolidated Statement ofCash Flows for the year ended December 31, 2011. See Note 21 for information regarding the completion of this acquisitionsubsequent to year-end.

YRI Acquisitions

On October 31, 2011, YRI acquired 68 KFC restaurants from an existing franchisee in South Africa for $71 million.

On July 1, 2010, we completed the exercise of our option with our Russian partner to purchase their interest in the co-branded Rostik’s-KFC restaurants across Russia and the Commonwealth of Independent States. As a result, we acquiredcompany ownership of 50 restaurants and gained full rights and responsibilities as franchisor of 81 restaurants, whichour partner previously managed as master franchisee. We paid cash of $60 million, net of settlement of a long-term notereceivable of $11 million, and assumed long-term debt of $10 million which was subsequently repaid. The remainingbalance of the purchase price of $12 million will be paid in cash in July 2012.

The impact of consolidating these businesses on all line-items within our Consolidated Statement of Income wasinsignificant to the comparison of our year-over-year results.

Refranchising (Gain) Loss

The Refranchising (gain) loss by reportable segment is presented below. We do not allocate such gains and losses to oursegments for performance reporting purposes.


China $ (14) $ (8) $ (3)YRI (a)(b)(c) 69 53 11U.S. (d) 17 18 (34)

Worldwide $ 72 $ 63 $ (26)

(a) During the year ended December 31, 2011 we decided to refranchise or close all of our remaining Company-operated Pizza Hut restaurants in the UK market. While an asset group comprising approximately 350 dine-in restaurants did not meet the criteria for held-for-sale classification as of December 31, 2011, our- decisionto sell was considered an impairment indicator. As such we reviewed this asset group for potential impairmentand determined that its carrying value was not recoverable based upon our estimate of expected refranchising



proceeds and holding period cash flows anticipated while we continue to operate the restaurants as companyunits. Accordingly, we wrote this asset group down to our estimate of its fair value, which is based on the salesprice we would expect to receive from a buyer. This fair value determination considered current market conditions,trends in the Pizza Hut UK business, and prices for similar transactions in the restaurant industry and resulted ina non-cash pre-tax write-down of $74 million which was recorded to Refranchising (gain) loss. This impairmentcharge decreased depreciation expense versus what would have otherwise been recorded by $3 million in 2011.This depreciation reduction was not allocated to the YRI segment, resulting in depreciation expense in the YRIsegment results continuing to be recorded at the rate at which it was prior to the impairment charges being recordedfor these restaurants. We will continue to review the asset group for any further necessary impairment until thedate it is sold. The write-down does not include any allocation of the Pizza Hut UK reporting unit goodwill in theasset group carrying value. This additional non-cash write-down would be recorded, consistent with our historicalpolicy, if the asset group ultimately meets the criteria to be classified as held for sale. Upon the ultimate sale of therestaurants, depending on the form of the transaction, we could also be required to record a charge for the fair valueof any guarantee of future lease payments for any leases we assign to a franchisee and for the cumulative foreigncurrency translation adjustment associated with Pizza Hut UK. The decision to refranchise or close all remainingPizza Hut restaurants in the UK was considered to be a goodwill impairment indicator. We determined that the fairvalue of our Pizza Hut UK reporting unit exceeded its carrying value and as such there was no impairment of theapproximately $100 million in goodwill attributable to the reporting unit.

(b) In the year ended December 25, 2010 we recorded a $52 million loss on the refranchising of our Mexico equitymarket as we sold all of our Company-owned restaurants, comprised of 222 KFCs and 123 Pizza Huts, to anexisting Latin American franchise partner. The buyer is serving as the master franchisee for Mexico which had 102KFC and 53 Pizza Hut franchise restaurants at the time of the transaction. The write-off of goodwill included inthis loss was minimal as our Mexico reporting unit included an insignificant amount of goodwill. This loss did notresult in any related income tax benefit.

(c) During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as a result ofour decision to offer to refranchise our KFC Taiwan equity market. During the year ended December 25, 2010 werefranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included inour December 25, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the losson refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit. The amount of goodwillwrite-off was based on the relative fair values of the Taiwan business disposed of and the portion of the businessthat was retained. The fair value of the business disposed of was determined by reference to the discounted valueof the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include adeduction for the anticipated royalties the franchisee will pay the Company associated with the franchise agreemententered into in connection with this refranchising transaction. The fair value of the Taiwan business retainedconsists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associatedwith the franchise agreement entered into in connection with this refranchising transaction. We believe the termsof the franchise agreement entered into in connection with the Taiwan refranchising are substantially consistentwith market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after theaforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceededits carrying amount.

(d) U.S. refranchising losses in the years ended December 31, 2011 and December 25, 2010 are primarily due to losseson sales of and offers to refranchise KFCs in the U.S. There were approximately 250 and 600 KFC restaurantsoffered for refranchising as of December 31, 2011 and December 25, 2010, respectively. While we did not yetbelieve these KFCs met the criteria to be classified as held for sale, we did, consistent with our historical practice,review the restaurants for impairment as a result of our offer to refranchise. We recorded impairment chargeswhere we determined that the carrying value of restaurant groups to be sold was not recoverable based uponour estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue tooperate the restaurants as company units. For those restaurant groups deemed impaired, we wrote such restaurantgroups down to our estimate of their fair values, which were based on the sales price we would expect to receivefrom a franchisee for each restaurant group. This fair value determination considered current market conditions,real-estate values, trends in the KFC U.S. business, prices for similar transactions in the restaurant industryand preliminary offers for the restaurant groups to date. The non-cash impairment charges that were recordedrelated to our offers to refranchise these company-operated KFC restaurants in the U.S. decreased depreciationexpense versus what would have otherwise been recorded by $10 million and $9 million in the years endedDecember 31, 2011 and December 25, 2010, respectively. These depreciation reductions were not allocated to theU.S. segment resulting in depreciation expense in the U.S. segment results continuing to be recorded at the rateat which it was prior to the impairment charges being recorded for these restaurants. We will continue to reviewthe restaurant groups for any further necessary impairment until the date they are sold. The aforementioned non-cash impairment charges do not include any allocation of the KFC reporting unit goodwill in the restaurant groupcarrying value. This additional non-cash write-down would be recorded, consistent with our historical policy, ifthe restaurant groups, or any subset of the restaurant groups, ultimately meet the criteria to be classified as held forsale. We will also be required to record a charge for the fair value of our guarantee of future lease payments forleases we assign to the franchisee upon any sale.

Store Closure and Impairment Activity



Store closure (income) costs and Store impairment charges by reportable segment are presented below. These tables exclude$80 million of net losses recorded in 2011 related to the LJS and A&W divestitures and a $26 million goodwill impairmentcharge recorded in 2009 related to the LJS and A&W businesses we previously owned. Neither of these amounts wereallocated to segments for performance reporting purposes:










(a) Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated aCompany restaurant that was closed, lease reserves established when we cease using a property under an operatinglease and subsequent adjustments to those reserves and other facility-related expenses from previously closedstores.

(b) The 2009 store impairment charges for YRI include $12 million of goodwill impairment for our Pizza Hut SouthKorea market.

The following table summarizes the 2011 and 2010 activity related to reserves for remaining lease obligations for closedstores.







12 Months EndedShareholders' Equity Dec. 31, 2011Stockholders' Equity Note[Abstract]Shareholders' Equity Shareholders’ Equity

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during2011 and 2010. All amounts exclude applicable transaction fees. There were no shares of ourCommon Stock repurchased during 2009.

Shares Repurchased(thousands)

Dollar Value of SharesRepurchased

Authorization Date 2011 2010 2009 2011 2010 2009November 2011 — — — $ — $ — $ —January 2011 10,864 — — 562 — —March 2010 3,441 2,161 — 171 107 —September 2009 — 7,598 — — 283 —

Total 14,305 (a) 9,759 (a) — $ 733 (a) $ 390 (a) $ —

(a) 2011 amount excludes and 2010 amount includes the effect of $19 million in sharerepurchases (0.4 million shares) with trade dates prior to the 2010 fiscal year end butcash settlement dates subsequent to the 2010 fiscal year.

As of December 31, 2011, we have $188 million available for future repurchases under our January2011 share repurchase authorization. Additionally, on November 18, 2011, our Board of Directorsauthorized share repurchases through May 2013 of up to $750 million (excluding applicabletransaction fees) of our outstanding Common Stock. No shares have been repurchased under theNovember 2011 authorization as of December 31, 2011.

Accumulated Other Comprehensive Income (Loss) – Comprehensive income is Net Income pluscertain other items that are recorded directly to Shareholders’ Equity. The following table givesfurther detail regarding the composition of accumulated other comprehensive loss at December 31,2011 and December 25, 2010. Refer to Note 14 for additional information about our pensionand post-retirement plan accounting and Note 12 for additional information about our derivativeinstruments.





12 Months EndedDerivative Instruments Dec. 31, 2011Derivative Instruments andHedging ActivitiesDisclosure [Abstract]Derivative Instruments Derivative Instruments

The Company is exposed to certain market risks relating to its ongoing business operations. Theprimary market risks managed by using derivative instruments are interest rate risk and cash flowvolatility arising from foreign currency fluctuations.

We enter into interest rate swaps with the objective of reducing our exposure to interest rate riskand lowering interest expense for a portion of our fixed-rate debt. At December 31, 2011, ourinterest rate swaps outstanding had notional amounts of $550 million and have been designated asfair value hedges of a portion of our debt. The Company's interest rate swaps meet the shortcutmethod requirements and no ineffectiveness has been recorded.

We enter into foreign currency forward contracts with the objective of reducing our exposureto cash flow volatility arising from foreign currency fluctuations associated with certain foreigncurrency denominated intercompany short-term receivables and payables. The notional amount,maturity date, and currency of these contracts match those of the underlying receivables orpayables. For those foreign currency exchange forward contracts that we have designated as cashflow hedges, we measure ineffectiveness by comparing the cumulative change in the fair valueof the forward contract with the cumulative change in the fair value of the hedged item. AtDecember 31, 2011, foreign currency forward contracts outstanding had a total notional amount of$459 million.

The fair values of derivatives designated as hedging instruments for the years endedDecember 31, 2011 and December 25, 2010 were:

Fair Value Consolidated Balance SheetLocation

2011 2010

Interest Rate Swaps - Asset $ 10$ 8 Prepaid expenses and other

current assetsInterest Rate Swaps - Asset 22 33 Other assets

Foreign Currency Forwards - Asset 37 Prepaid expenses and other

current assetsForeign Currency Forwards -Liability (1)

(3) Accounts payable and othercurrent liabilities

Total $ 34 $ 45

The unrealized gains associated with our interest rate swaps that hedge the interest rate riskfor a portion of our debt have been reported as an addition of $5 million and $21 million toShort-term borrowings and Long-term debt, respectively at December 31, 2011 and as an additionof $5 million and $26 million to Short-term borrowings and Long-term debt, respectively atDecember 25, 2010. During the years ended December 31, 2011 and December 25, 2010, Interestexpense, net was reduced by $24 million and $33 million, respectively for recognized gains onthese interest rate swaps.

For our foreign currency forward contracts the following effective portions of gains and losseswere recognized into Other Comprehensive Income (“OCI”) and reclassified into income fromOCI in the years ended December 31, 2011 and December 25, 2010.



2011 2010Gains (losses) recognized into OCI, net of tax $ 2 $ 32Gains (losses) reclassified from Accumulated OCI into income, net of tax $ 1 $ 33

The gains/losses reclassified from Accumulated OCI into income were recognized as Otherincome (expense) in our Consolidated Statement of Income, largely offsetting foreign currencytransaction losses/gains recorded when the related intercompany receivables and payables wereadjusted for foreign currency fluctuations. Changes in fair values of the foreign currency forwardsrecognized directly in our results of operations either from ineffectiveness or exclusion fromeffectiveness testing were insignificant in the years ended December 31, 2011 and December 25,2010.

Additionally, we had a net deferred loss of $12 million and $13 million, net of tax, as ofDecember 31, 2011 and December 25, 2010, respectively within Accumulated OCI due to treasurylocks and forward-starting interest rate swaps that have been cash settled, as well as outstandingforeign currency forward contracts. The majority of this loss arose from the settlement of forwardstarting interest rate swaps entered into prior to the issuance of our Senior Unsecured Notes duein 2037, and is being reclassified into earnings through 2037 to interest expense. In each of2011, 2010 and 2009 an insignificant amount was reclassified from Accumulated OCI to Interestexpense, net as a result of these previously settled cash flow hedges.

As a result of the use of derivative instruments, the Company is exposed to risk that thecounterparties will fail to meet their contractual obligations. To mitigate the counterparty creditrisk, we only enter into contracts with carefully selected major financial institutions based upontheir credit ratings and other factors, and continually assess the creditworthiness ofcounterparties. At December 31, 2011 and December 25, 2010, all of the counterparties to ourinterest rate swaps and foreign currency forwards had investment grade ratings according to thethree major ratings agencies. To date, all counterparties have performed in accordance with theircontractual obligations.



12 Months EndedSupplemental Balance SheetInformation Dec. 31, 2011

Supplemental Balance SheetInformation Disclosure [Abstract]Supplemental Balance SheetInformation

Supplemental Balance Sheet Information

Prepaid Expenses and Other Current Assets 2011 2010Income tax receivable $ 150 $ 115Assets held for sale 24 23Other prepaid expenses and current assets 164 131

$ 338 $ 269

Property, Plant and Equipment 2011 2010Land $ 527 $ 542Buildings and improvements 3,856 3,709Capital leases, primarily buildings 316 274Machinery and equipment 2,568 2,578Property, Plant and equipment, gross 7,267 7,103Accumulated depreciation and amortization (3,225) (3,273)


Depreciation and amortization expense related to property, plant and equipment was $599million, $565 million and $553 million in 2011, 2010 and 2009, respectively.

Accounts Payable and Other Current Liabilities 2011 2010Accounts payable $ 712 $ 540Accrued capital expenditures 229 174Accrued compensation and benefits 440 357Dividends payable 131 118Accrued taxes, other than income taxes 112 95Other current liabilities 250 318

$ 1,874 $ 1,602



12 Months Ended 12 MonthsEnded

Goodwill and IntangibleAssets (Details) (USD $)


Dec.31,

2011

Dec.25,

2010

Dec.31,

2011LJSandAW

Dec.31,

2011U.S.

Dec.25,

2010U.S.

Dec.31,

2011YRI

Dec.25,

2010YRI

Oct. 31,2011YRIKFCSouthAfrica

restaurants

Dec.31,

2011China

Dec.25,

2010China

Changes in the carrying amount ofgoodwill [Roll Forward]Goodwill, gross (beginning balance) $

702$683

$348

$352

$269

$249

$85

$82

Accumulated impairment losses(beginning balance) (43) (43) (26) (26) (17) (17) 0 0

Goodwill, net (beginning balance) 659 640 322 326 252 232 85 82Acquisitions 32 [1] 37 [2] 0 0 32 [1] 37 [2] 0 0Disposals and other, net (10) [3] (18) [3] (11) [3] (4) [3] (2) [3] (17) [3] 3 [3] 3 [3]

Goodwill, gross (ending balance) 698 [4] 702 311 [4] 348 299 269 88 85Accumulated impairment losses(ending balance) (17) [4] (43) 0 [4] (26) (17) (17) 0 0

Goodwill, net (ending balance) 681 [4] 659 311 [4] 322 282 252 88 85Number of restaurants acquired 68Non-cash write-off of previouslyfully impaired Goodwill related tobusiness divestitures

$(26)

[1] We recorded goodwill in our YRI segment related to the acquisition of 68 stores in South Africa. See Note 4.[2] We recorded goodwill in our YRI segment related to the July 1, 2010 exercise of our option with our Russian

partner to purchase their interest in the co-branded Rostik’s-KFC restaurants across Russia and theCommonwealth of Independent States. See Note 4.

[3] Disposals and other, net includes the impact of foreign currency translation on existing balances andgoodwill write-offs associated with refranchising.

[4] As a result of the LJS and A&W divestitures in 2011, we disposed of $26 million of goodwill that was fullyimpaired in 2009.



12 Months EndedFranchise and License Feesand Income Dec. 31, 2011

Franchise And License Fees And IncomeDisclosure [Abstract]Franchise and license fees and income Franchise and License Fees and Income

2011 2010 2009Initial fees, including renewal fees $ 68 $ 54 $ 57Initial franchise fees included inRefranchising (gain) loss (21) (15) (17)


$1,733 $1,560 $1,423



12 Months EndedOther (Income) Expense Dec. 31, 2011Other Income and Expenses[Abstract]Other (Income) Expense Other (Income) Expense

2011 2010 2009Equity income from investments in unconsolidatedaffiliates $ (47) $ (42) $ (36)Gain upon consolidation of a former unconsolidatedaffiliate in China(a) — — (68)Foreign exchange net (gain) loss and other (6) (1) —


(a) See Note 4 for further discussion of the consolidation of a former unconsolidatedaffiliate in Shanghai, China.



12 Months EndedGoodwill and IntangibleAssets Dec. 31, 2011

Goodwill and IntangibleAssets Disclosure [Abstract]Goodwill and IntangibleAssets

Goodwill and Intangible Assets







Goodwill, net $ 88 $ 282 $ 311 $ 681

(a) We recorded goodwill in our YRI segment related to the July 1, 2010 exercise of ouroption with our Russian partner to purchase their interest in the co-branded Rostik’s-KFCrestaurants across Russia and the Commonwealth of Independent States. See Note 4.

(b) Disposals and other, net includes the impact of foreign currency translation on existingbalances and goodwill write-offs associated with refranchising.

(c) We recorded goodwill in our YRI segment related to the acquisition of 68 stores in SouthAfrica. See Note 4.

(d) As a result of the LJS and A&W divestitures in 2011, we disposed of $26 million ofgoodwill that was fully impaired in 2009.


2011 2010



GrossCarryingAmount


Definite-lived intangibleassets

Franchise contract rights $ 130 $ (77) $ 163 $ (83)



Trademarks/brands 28 (12) 234 (57)Lease tenancy rights 58 (12) 56 (12)Favorable operating leases 29 (13) 27 (10)Reacquired franchise rights 167 (33) 143 (20)Other 5 (2) 5 (2)

$ 417 $ (149) $ 628 $ (184)

Indefinite-lived intangibleassets

Trademarks/brands $ 31 $ 31

Amortization expense for all definite-lived intangible assets was $31 million in 2011, $29 millionin 2010 and $25 million in 2009. Amortization expense for definite-lived intangible assets willapproximate $21 million annually in 2012, $19 million in 2013, $17 million in 2014 and $16million in 2015 and 2016. The LJS and A&W divestitures impacted Trademarks/brands by $164million (net of accumulation amortization of $48 million) and decreased future amortizationexpense by approximately $8 million annually.



Derivative Instruments(Details) (USD $)


Dec. 31,2011

Dec. 25,2010

Derivatives, Fair Value [Line Items]Total fair value of derivatives designated as hedging instruments $ 34 $ 45Unrealized gains associated with interest rate swaps that hedge the interest rate risk for aportion of our debt and reported as an addition to debt 26

Interest Rate SwapsDerivatives, Fair Value [Line Items]Notional amount of interest rate derivative instruments outstanding 550Interest Rate Swaps | Prepaid Expenses and other current assetsDerivatives, Fair Value [Line Items]Derivative assets 10 8Interest Rate Swaps | Other assetsDerivatives, Fair Value [Line Items]Derivative assets 22 33Interest Rate Swaps | Short-term borrowingsDerivatives, Fair Value [Line Items]Unrealized gains associated with interest rate swaps that hedge the interest rate risk for aportion of our debt and reported as an addition to debt 5 5

Interest Rate Swaps | Long-term debtDerivatives, Fair Value [Line Items]Unrealized gains associated with interest rate swaps that hedge the interest rate risk for aportion of our debt and reported as an addition to debt 21 26

Foreign Currency ForwardsDerivatives, Fair Value [Line Items]Notional amount of foreign currency derivative instruments outstanding 459Foreign Currency Forwards | Prepaid Expenses and other current assetsDerivatives, Fair Value [Line Items]Derivative assets 3 7Foreign Currency Forwards | Accounts payable and other current liabilitiesDerivatives, Fair Value [Line Items]Derivative liability $ (1) $ (3)



12 Months EndedFair Value Disclosures(Details) (USD $) Dec. 31, 2011 Dec. 25,

2010Fair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Abstract]Fair Value, Level 1 to level 2 Transfers, Amount $ 0Fair Value, Level 2 to level 1 Transfers, Amount 0Debt obligations, excluding capital leases, estimate of fair value 3,500,000,000Debt obligations, excluding capital leases, carrying amount 3,000,000,000Fair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Derivative assets (liabilities), net 34,000,000 45,000,000Recurring basisFair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Total 49,000,000 59,000,000Recurring basis | Level 1 [Member]Fair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Other Investments 15,000,000 14,000,000Recurring basis | Level 2 [Member] | Foreign Currency Forwards, netFair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Derivative assets (liabilities), net 2,000,000 4,000,000Recurring basis | Level 2 [Member] | Interest Rate Swaps, netFair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Derivative assets (liabilities), net 32,000,000 41,000,000Non-recurring basisFair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Long-lived assets held for use 50,000,000 184,000,000Total losses related to long-lived assets held for use and measured at fair value on anon-recurring basis 128,000,000 110,000,000

Non-recurring basis | Refranchising (gain) lossFair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Total losses related to long-lived assets held for use and measured at fair value on anon-recurring basis 95,000,000 80,000,000

Non-recurring basis | Closures and impairment (income) expensesFair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Total losses related to long-lived assets held for use and measured at fair value on anon-recurring basis 33,000,000 30,000,000

Non-recurring basis | Level 1 [Member]



Fair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Long-lived assets held for use 0 0Non-recurring basis | Level 2 [Member]Fair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Long-lived assets held for use 0 0Non-recurring basis | Level 3 [Member]Fair Value, Assets and Liabilities Measured on Recurring and NonrecurringBasis [Line Items]Long-lived assets held for use $ 50,000,000 $

184,000,000



12 Months EndedLeases (Details) (USD $)


Dec. 31,2011Years

restaurants

Dec. 25,2010

Dec. 26,2009

Leases [Abstract]Approximate number of restaurants operated 7,400Approximate number of restaurants operated on leased land and/or buildings 6,200Maximum duration of lease commitments from inception for the vast majorityof our lease commitments (in years) 20

Year longest lease expires 2151Capital leases, future minimum commitments [Abstract]2012 $ 652013 272014 262015 262016 26Thereafter 267Capital leases, total future minimum commitments 437Operating leases, future minimum commitments [Abstract]2012 6122013 5782014 5382015 4942016 462Thereafter 2,653Operating leases, total future minimum commitments 5,337Direct financing leases, lease receivables [Abstract]2012 32013 22014 22015 22016 2Thereafter 14Direct financing leases, total lease receivables 25Operating leases, lease receivables [Abstract]2012 492013 422014 392015 352016 31Thereafter 139Operating leases, total lease receivables 335Present value of minimum payments under capital leases 279 236



Unearned income associated with direct financing lease receivables 14Rental expenseMinimum 625 565 541Contingent 233 158 123Total rental expense 858 723 664Minimum rental income $ 66 $ 44 $ 38



12 Months EndedFranchise and License Feesand Income (Tables) Dec. 31, 2011

Franchise And License Fees And IncomeDisclosure [Abstract]Franchise and License Fees and Income

2011 2010 2009Initial fees, including renewal fees $ 68 $ 54 $ 57Initial franchise fees included inRefranchising (gain) loss (21) (15) (17)


$1,733 $1,560 $1,423



3 Months Ended 4 MonthsEnded 12 Months EndedSummary of Significant

Accounting Policies (Details2) (USD $)


Sep. 03,2011

Jun.11,

2011

Mar.19,

2011

Sep.04,

2010

Jun.12,

2010

Mar.20,

2010

Dec.31,

2011

Dec.25,

2010

Dec. 31, 2011weeks Dec. 25, 2010 Dec. 26, 2009

Fiscal Period Adjustment[Line Items]Week added as a result of thefiscal year ending on the lastSaturday in December

53rd

Frequency of adding a week asa result of the fiscal yearending on the last Saturday inDecember

five orsix

Number of weeks in each ofthe first three quarters of eachfiscal year

12

Number of weeks in the fourthquarter of each fiscal year with52 weeks

16

Number of weeks in the fourthquarter of each fiscal year with53 weeks

17

Number of months in the firstquarter for certaininternational subsidiaries thatoperate on monthly calendars

2months

Number of months in thesecond and third quarters forcertain internationalsubsidiaries that operate onmonthly calendars

3months

Number of months in thefourth quarter for certaininternational subsidiaries thatoperate on monthly calendars

4months

Number of periods or monthsin advance that allinternational businesses exceptChina close their books

1month

Total revenues $3,274

$2,816

$2,425

$2,862

$2,574

$2,345

$4,111

$3,562

$12,626

$11,343

$10,836

Restaurant profit 494 386 360 479 366 340 513 478 1,753 1,663Operating Profit 488 [1] 419 401 [1] 544 421 364 [2] 507 [1] 440 [2] 1,815 [1],[3],[4],[5],[6] 1,769 [2],[3],[5],[6] 1,590 [3],[4],[5],[7]

53rd Week ImpactFiscal Period Adjustment[Line Items]Total revenues 91Restaurant profit 15Operating Profit $ 25 $ 25[1] Includes net losses of $65 million primarily related to the LJS and A&W divestitures, $88 million primarily related to refranchising international

markets and $28 million primarily related to the U.S. business transformation measures and U.S. refranchising in the first, third and fourth quartersof 2011, respectively. See Note 4. The fourth quarter of 2011 also includes the $25 million impact of the 53rd week. See Note 2.







12 Months EndedPension, Retiree Medical andRetiree Savings Plans Dec. 31, 2011

Compensation andRetirement Disclosure[Abstract]Pension and Post-retirementMedical Benefits

Pension, Retiree Medical and Retiree Savings Plans

Pension Benefits

We sponsor noncontributory defined benefit pension plans covering certain full-time salariedand hourly U.S. employees. The most significant of these plans, the YUM Retirement Plan(the “Plan”), is funded while benefits from the other U.S. plans are paid by the Company asincurred. During 2001, the plans covering our U.S. salaried employees were amended such thatany salaried employee hired or rehired by YUM after September 30, 2001 is not eligible toparticipate in those plans. Benefits are based on years of service and earnings or stated amountsfor each year of service. We also sponsor various defined benefit pension plans covering certainof our non-U.S. employees, the most significant of which are in the UK. Our plans in the UK havepreviously been amended such that new employees are not eligible to participate in these plans.Additionally, in 2011 one of our UK plans was frozen such that existing participants can no longerearn future service credits. This resulted in a curtailment gain of $10 million which was credited toAccumulated other comprehensive income (loss).

Obligation and Funded Status at Measurement Date:

The following chart summarizes the balance sheet impact, as well as benefit obligations, assets,and funded status associated with our U.S. pension plans and significant International pensionplans. The actuarial valuations for all plans reflect measurement dates coinciding with our fiscalyear ends.


Plans2011 2010 2011 2010





Fair value of plan assets at beginning ofyear $ 907 $ 835 $ 164 $ 141

Actual return on plan assets 83 108 10 14



Employer contributions 53 35 10 17Participant contributions — — 1 2Settlement payments — (9) — —Benefits paid (40) (57) (2) (4)Exchange rate changes — — — (6)Administrative expenses (5) (5) — —



Amounts recognized in the Consolidated Balance Sheet:


Plans2011 2010 2011 2010

Accrued benefit asset - non-current $ — $ — $ 8 $ —Accrued benefit liability – current (14) (10) — —Accrued benefit liability – non-current (369) (191) (12) (23)

$ (383) $ (201) $ (4) $ (23)

Amounts recognized as a loss in Accumulated Other Comprehensive Income:


Plans2011 2010 2011 2010

Actuarial net loss $ 540 $ 359 $ 30 $ 46Prior service cost 3 4 — —

$ 543 $ 363 $ 30 $ 46

The accumulated benefit obligation for the U.S. and International pension plans was $1,496million and $1,212 million at December 31, 2011 and December 25, 2010, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets:


Plans2011 2010 2011 2010

Projected benefit obligation $ 1,381 $ 1,108 $ — $ —Accumulated benefit obligation 1,327 1,057 — —Fair value of plan assets 998 907 — —

Information for pension plans with a projected benefit obligation in excess of plan assets:


Plans2011 2010 2011 2010

Projected benefit obligation $ 1,381 $ 1,108 $ 99 $ 187



Accumulated benefit obligation 1,327 1,057 87 155Fair value of plan assets 998 907 87 164

Our funding policy with respect to the U.S. Plan is to contribute amounts necessary to satisfyminimum pension funding requirements, including requirements of the Pension Protection Actof 2006, plus such additional amounts from time to time as are determined to be appropriate toimprove the U.S. Plan’s funded status. We currently estimate that we will be required to contributeapproximately $30 million to the U.S. Plan in 2012.

The funding rules for our pension plans outside of the U.S. vary from country to country anddepend on many factors including discount rates, performance of plan assets, local laws andregulations. We do not believe we will be required to make significant contributions to anypension plan outside of the U.S. in 2012.

We do not anticipate any plan assets being returned to the Company during 2012 for any plans.


U.S. Pension Plans International Pension PlansNet periodic benefit cost 2011 2010 2009 2011 2010 2009Service cost $ 24 $ 25 $ 26 $ 5 $ 6 $ 5Interest cost 64 62 58 10 9 7Amortization of prior servicecost(a) 1 1 1 — — —Expected return on plan assets (71) (70) (59) (12) (9) (7)Amortization of net loss 31 23 13 2 2 2


Settlement(b) $ — $ 3 $ 2 $ — $ — $ —Special termination benefits(c) $ 5 $ 1 $ 4 $ — $ — $ —

(a) Prior service costs are amortized on a straight-line basis over the average remainingservice period of employees expected to receive benefits.

(b) Settlement loss results from benefit payments from a non-funded plan exceeding the sumof the service cost and interest cost for that plan during the year.

(c) Special termination benefits primarily related to the U.S. business transformationmeasures taken in 2011, 2010 and 2009.



2011 2010 2011 2010Beginning of year $ 363 $ 346 $ 46 $ 48Net actuarial (gain) loss 219 43 (5) 2Curtailment gain (7) (2) (10) —Amortization of net loss (31) (23) (2) (2)Amortization of prior service cost (1) (1) — —Exchange rate changes — — 1 (2)

End of year $ 543 $ 363 $ 30 $ 46



The estimated net loss for the U.S. and International pension plans that will be amortized fromaccumulated other comprehensive loss into net periodic pension cost in 2012 is $63 million and$1 million, respectively. The estimated prior service cost for the U.S. pension plans that will beamortized from accumulated other comprehensive loss into net periodic pension cost in 2012 is $1million.



2011 2010 2011 2010Discount rate 4.90% 5.90% 4.75% 5.40%Rate of compensation increase 3.75% 3.75% 3.85% 4.42%


2011 2010 2009 2011 2010 2009Discount rate 5.90% 6.30% 6.50% 5.40% 5.50% 5.51%Long-term rate of return on planassets 7.75% 7.75% 8.00% 6.64% 6.66% 7.20%Rate of compensation increase 3.75% 3.75% 3.75% 4.41% 4.42% 4.12%

Our estimated long-term rate of return on plan assets represents the weighted-average of expectedfuture returns on the asset categories included in our target investment allocation based primarilyon the historical returns for each asset category, adjusted for an assessment of current marketconditions.

Plan Assets

The fair values of our pension plan assets at December 31, 2011 by asset category and level withinthe fair value hierarchy are as follows:

U.S. PensionPlans

InternationalPensionPlans


Level 2:Cash Equivalents(a) 62 —Equity Securities – U.S. Large cap(b) 324 —Equity Securities – U.S. Mid cap(b) 54 —Equity Securities – U.S. Small cap(b) 54 —Equity Securities – Non-U.S.(b) 88 109Fixed Income Securities – U.S. Corporate(b) 263 —Fixed Income Securities – Non-U.S. Corporate(b) — 23Fixed Income Securities – U.S. Government and Government

Agencies(c) 164 —Fixed Income Securities – Other(b)(c) 39 11



Other Investments(b) — 40





(d) Excludes net payable of $51 million in the U.S. for purchases of assets included in theabove that were settled after year end

Our primary objectives regarding the investment strategy for the Plan’s assets, which make up 85%of total pension plan assets at the 2011 measurement date, are to reduce interest rate and marketrisk and to provide adequate liquidity to meet immediate and future payment requirements. Toachieve these objectives, we are using a combination of active and passive investmentstrategies. Our equity securities, currently targeted at 55% of our investment mix, consistprimarily of low-cost index funds focused on achieving long-term capital appreciation. Wediversify our equity risk by investing in several different U.S. and foreign market indexfunds. Investing in these index funds provides us with the adequate liquidity required to fundbenefit payments and plan expenses. The fixed income asset allocation, currently targeted at 45%of our mix, is actively managed and consists of long-duration fixed income securities that help toreduce exposure to interest rate variation and to better correlate asset maturities with obligations.

A mutual fund held as an investment by the Plan includes shares of YUM common stock valued at$0.7 million at December 31, 2011 and $0.6 million at December 25, 2010 (less than 1% of totalplan assets in each instance).

Benefit Payments

The benefits expected to be paid in each of the next five years and in the aggregate for the fiveyears thereafter are set forth below:

Year ended:

U.S.PensionPlans


2012 $ 68 $ 12013 50 12014 47 12015 50 12016 51 12017 - 2021 309 8

Expected benefits are estimated based on the same assumptions used to measure our benefitobligation on the measurement date and include benefits attributable to estimated future employeeservice.

Retiree Medical Benefits

Our post-retirement plan provides health care benefits, principally to U.S. salaried retirees andtheir dependents, and includes retiree cost-sharing provisions. During 2001, the plan was amendedsuch that any salaried employee hired or rehired by YUM after September 30, 2001 is not eligibleto participate in this plan. Employees hired prior to September 30, 2001 are eligible for benefitsif they meet age and service requirements and qualify for retirement benefits. We fund our post-retirement plan as benefits are paid.



At the end of 2011 and 2010, the accumulated post-retirement benefit obligation was $86 millionand $78 million, respectively. The actuarial loss recognized in Accumulated other comprehensiveloss was $12 million at the end of 2011 and $6 million at the end of 2010. The net periodic benefitcost recorded in 2011, 2010 and 2009 was $6 million, $6 million and $7 million, respectively,the majority of which is interest cost on the accumulated post-retirement benefit obligation. 2011,2010 and 2009 costs each included less than $1 million of special termination benefits primarilyrelated to the U.S. business transformation measures described in Note 4. The weighted-averageassumptions used to determine benefit obligations and net periodic benefit cost for the post-retirement medical plan are identical to those as shown for the U.S. pension plans. Our assumedheath care cost trend rates for the following year as of 2011 and 2010 are 7.5% and 7.7%,respectively, with expected ultimate trend rates of 4.5% reached in 2028.

There is a cap on our medical liability for certain retirees. The cap for Medicare-eligible retireeswas reached in 2000 and the cap for non-Medicare eligible retirees is expected to be reached in2014; once the cap is reached, our annual cost per retiree will not increase. A one-percentage-point increase or decrease in assumed health care cost trend rates would have less than a $1 millionimpact on total service and interest cost and on the post-retirement benefit obligation. The benefitsexpected to be paid in each of the next five years are approximately $7 million and in aggregatefor the five years thereafter are $29 million.

Retiree Savings Plan

We sponsor a contributory plan to provide retirement benefits under the provisions of Section401(k) of the Internal Revenue Code (the “401(k) Plan”) for eligible U.S. salaried and hourlyemployees. Participants are able to elect to contribute up to 75% of eligible compensation on apre-tax basis. Participants may allocate their contributions to one or any combination of multipleinvestment options or a self-managed account within the 401(k) Plan. We match 100% of theparticipant’s contribution to the 401(k) Plan up to 6% of eligible compensation. We recognized ascompensation expense our total matching contribution of $14 million in 2011, $15 million in 2010and $16 million in 2009.



12 Months EndedContingencies Dec. 31, 2011Commitments andContingencies Disclosure[Abstract]Contingencies Contingencies

Lease Guarantees

As a result of (a) assigning our interest in obligations under real estate leases as a condition tothe refranchising of certain Company restaurants; (b) contributing certain Company restaurants tounconsolidated affiliates; and (c) guaranteeing certain other leases, we are frequently contingentlyliable on lease agreements. These leases have varying terms, the latest of which expires in2065. As of December 31, 2011, the potential amount of undiscounted payments we could berequired to make in the event of non-payment by the primary lessee was approximately $625million. The present value of these potential payments discounted at our pre-tax cost of debtat December 31, 2011 was approximately $550 million. Our franchisees are the primary lesseesunder the vast majority of these leases. We generally have cross-default provisions with thesefranchisees that would put them in default of their franchise agreement in the event of non-paymentunder the lease. We believe these cross-default provisions significantly reduce the risk that wewill be required to make payments under these leases. Accordingly, the liability recorded forour probable exposure under such leases at December 31, 2011 and December 25, 2010 was notmaterial.

Franchise Loan Pool and Equipment Guarantees

We have agreed to provide financial support, if required, to a variable interest entity that operatesa franchisee lending program used primarily to assist franchisees in the development of newrestaurants in the U.S. and, to a lesser extent, in connection with the Company’s refranchisingprograms. As part of this agreement, we have provided a partial guarantee of approximately $14million and two letters of credit totaling approximately $23 million in support of the franchiseeloan program at December 31, 2011. One such letter of credit could be used if we fail to meet ourobligations under our guarantee. The other letter of credit could be used, in certain circumstances,to fund our participation in the funding of the franchisee loan program. The total loans outstandingunder the loan pool were $63 million at December 31, 2011 with an additional $17 millionavailable for lending at December 31, 2011. We have determined that we are not required toconsolidate this entity as we share the power to direct this entity’s lending activity with otherparties.

In addition to the guarantee described above, YUM has provided guarantees of $17 million onbehalf of franchisees for several financing programs related to specific initiatives. The total loansoutstanding under these financing programs were approximately $32 million at December 31,2011.

Unconsolidated Affiliates Guarantees

From time to time we have guaranteed certain lines of credit and loans of unconsolidatedaffiliates. At December 31, 2011 there are no guarantees outstanding for unconsolidatedaffiliates. Our unconsolidated affiliates had total revenues of approximately $1.1 billion for theyear ended December 31, 2011 and assets and debt of approximately $525 million and $75 million,respectively, at December 31, 2011.

Insurance Programs

We are self-insured for a substantial portion of our current and prior years’ coverage includingproperty and casualty losses. To mitigate the cost of our exposures for certain property and



casualty losses, we self-insure the risks of loss up to defined maximum per occurrence retentionson a line-by-line basis. The Company then purchases insurance coverage, up to a certain limit, forlosses that exceed the self-insurance per occurrence retention. The insurers’ maximum aggregateloss limits are significantly above our actuarially determined probable losses; therefore, we believethe likelihood of losses exceeding the insurers’ maximum aggregate loss limits is remote.

The following table summarizes the 2011 and 2010 activity related to our self-insured property andcasualty reserves as of December 31, 2011.


EndingBalance


In the U.S. and in certain other countries, we are also self-insured for healthcare claims andlong-term disability for eligible participating employees subject to certain deductibles andlimitations. We have accounted for our retained liabilities for property and casualty losses,healthcare and long-term disability claims, including reported and incurred but not reported claims,based on information provided by independent actuaries.

Due to the inherent volatility of actuarially determined property and casualty loss estimates, it isreasonably possible that we could experience changes in estimated losses which could be materialto our growth in quarterly and annual Net income. We believe that we have recorded reservesfor property and casualty losses at a level which has substantially mitigated the potential negativeimpact of adverse developments and/or volatility.

Legal Proceedings

We are subject to various claims and contingencies related to lawsuits, real estate, environmentaland other matters arising in the normal course of business.

On November 26, 2001, Kevin Johnson, a former Long John Silver's (“LJS”) restaurant manager,filed a collective action against LJS in the United States District Court for the Middle Districtof Tennessee alleging violation of the Fair Labor Standards Act (“FLSA”) on behalf of himselfand allegedly similarly-situated LJS general and assistant restaurant managers. Johnson allegedthat LJS violated the FLSA by perpetrating a policy and practice of seeking monetary restitutionfrom LJS employees, including Restaurant General Managers (“RGMs”) and Assistant RestaurantGeneral Managers (“ARGMs”), when monetary or property losses occurred due to knowing andwillful violations of LJS policies that resulted in losses of company funds or property, and thatLJS had thus improperly classified its RGMs and ARGMs as exempt from overtime pay under theFLSA. Johnson sought overtime pay, liquidated damages, and attorneys' fees for himself and hisproposed class.

LJS moved the Tennessee district court to compel arbitration of Johnson's suit. The district courtgranted LJS's motion on June 7, 2004, and the United States Court of Appeals for the Sixth Circuitaffirmed on July 5, 2005.

On December 19, 2003, while the arbitrability of Johnson's claims was being litigated, formerLJS managers Erin Cole and Nick Kaufman, represented by Johnson's counsel, initiated arbitrationwith the American Arbitration Association (the “Cole Arbitration”). The Cole Claimants soughta collective arbitration on behalf of the same putative class as alleged in the Johnson lawsuit andalleged the same underlying claims.

On June 15, 2004, the arbitrator in the Cole Arbitration issued a Clause Construction Award,finding that LJS's Dispute Resolution Policy did not prohibit Claimants from proceeding on acollective or class basis. LJS moved unsuccessfully to vacate the Clause Construction Award in



federal district court in South Carolina. On September 19, 2005, the arbitrator issued a ClassDetermination Award, finding, inter alia, that a class would be certified in the Cole Arbitration onan “opt-out” basis, rather than as an “opt-in” collective action as specified by the FLSA.

On January 20, 2006, the district court denied LJS's motion to vacate the Class DeterminationAward and the United States Court of Appeals for the Fourth Circuit affirmed the district court'sdecision on January 28, 2008. A petition for a writ of certiorari filed in the United States SupremeCourt seeking a review of the Fourth Circuit's decision was denied on October 7, 2008.

An arbitration hearing on liability with respect to the alleged restitution policy and practice forthe period beginning in late 1998 through early 2002 concluded in June, 2010. On October 11,2010, the arbitrator issued a partial interim award for the first phase of the three-phase arbitrationfinding that, for the period from late 1998 to early 2002, LJS had a policy and practice of makingimpermissible deductions from the salaries of its RGMs and ARGMs.

On September 15, 2011, the parties entered into a Memorandum of Understanding setting forth theterms upon which the parties had agreed to settle this matter. On October 5, 2011, the arbitratorgranted the parties' Joint Motion for Preliminary Approval of the Settlement. On December 12,2011, the arbitrator granted final approval of the settlement. The payments associated with thesettlement have been made. As the settlement was largely consistent with our previous reserveposition, the settlement did not significantly impact our results of operations in the year endedDecember 31, 2011.

On August 4, 2006, a putative class action lawsuit against Taco Bell Corp. styled Rajeev Chhibbervs. Taco Bell Corp. was filed in Orange County Superior Court. On August 7, 2006, anotherputative class action lawsuit styled Marina Puchalski v. Taco Bell Corp. was filed in San DiegoCounty Superior Court. Both lawsuits were filed by a Taco Bell RGM purporting to represent allcurrent and former RGMs who worked at corporate-owned restaurants in California since August2002. The lawsuits allege violations of California's wage and hour laws involving unpaid overtimeand meal period violations and seek unspecified amounts in damages and penalties. The caseswere consolidated in San Diego County as of September 7, 2006.

On January 29, 2010, the court granted the plaintiffs' class certification motion with respect to theunpaid overtime claims of RGMs and Market Training Managers but denied class certification onthe meal period claims. The court has ruled that this case will be tried to the bench rather than ajury. Trial began on February 15, 2012.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. Wehave provided for a reasonable estimate of the cost of this lawsuit. However, in view of the inherentuncertainties of litigation, there can be no assurance that this lawsuit will not result in losses inexcess of those currently provided for in our Consolidated Financial Statements.

Taco Bell was named as a defendant in a number of putative class action suits filed in 2007, 2008,2009 and 2010 alleging violations of California labor laws including unpaid overtime, failureto pay wages on termination, failure to pay accrued vacation wages, failure to pay minimumwage, denial of meal and rest breaks, improper wage statements, unpaid business expenses,wrongful termination, discrimination, conversion and unfair or unlawful business practices inviolation of California Business & Professions Code §17200. Plaintiffs also seek penalties foralleged violations of California's Labor Code under California's Private Attorneys General Act andstatutory “waiting time” penalties and allege violations of California's Unfair Business PracticesAct. Plaintiffs seek to represent a California state-wide class of hourly employees.

On May 19, 2009 the court granted Taco Bell's motion to consolidate these matters, and theconsolidated case is styled In Re Taco Bell Wage and Hour Actions. The In Re Taco Bell Wage andHour Actions plaintiffs filed a consolidated complaint on June 29, 2009, and on March 30, 2010the court approved the parties' stipulation to dismiss the Company from the action. Plaintiffs filedtheir motion for class certification on the vacation and final pay claims on December 30, 2010,and the class certification hearing took place in June 2011. Taco Bell also filed, at the invitationof the court, a motion to stay the proceedings until the California Supreme Court rules on two



cases concerning meal and rest breaks. On August 22, 2011, the court granted Taco Bell's motionto stay the meal and rest break claims. On September 26, 2011, the court issued its order denyingthe certification of the remaining vacation and final pay claims. The plaintiffs have not moved forclass certification on the remaining claims in the consolidated complaint.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit.However, in view of the inherent uncertainties of litigation, the outcome of this case cannot bepredicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On September 28, 2009, a putative class action styled Marisela Rosales v. Taco Bell Corp. wasfiled in Orange County Superior Court. The plaintiff, a former Taco Bell crew member, allegesthat Taco Bell failed to timely pay her final wages upon termination, and seeks restitution and latepayment penalties on behalf of herself and similarly situated employees. This case appears to beduplicative of the In Re Taco Bell Wage and Hour Actions case described above. Taco Bell filed amotion to dismiss, stay or transfer the case to the same district court as the In Re Taco Bell Wageand Hour Actions case. The state court granted Taco Bell's motion to stay the Rosales case on May28, 2010. After the denial of class certification in the In Re Taco Bell Wage and Hour Actions,the court granted the plaintiff leave to amend her lawsuit, which the plaintiff filed and served onJanuary 4, 2012. Taco Bell filed its responsive pleading on February 8, 2012.


On October 2, 2009, a putative class action, styled Domonique Hines v. KFC U.S. Properties, Inc.,was filed in California state court on behalf of all California hourly employees alleging variousCalifornia Labor Code violations, including rest and meal break violations, overtime violations,wage statement violations and waiting time penalties. Plaintiff is a former non-managerial KFCrestaurant employee. KFC filed an answer on October 28, 2009, in which it denied plaintiff'sclaims and allegations. KFC removed the action to the United States District Court for theSouthern District of California on October 29, 2009. Plaintiff filed a motion for class certificationon May 20, 2010 and KFC filed a brief in opposition. On October 22, 2010, the District Courtgranted Plaintiff's motion to certify a class on the meal and rest break claims, but denied the motionto certify a class regarding alleged off-the-clock work. On November 1, 2010, KFC filed a motionrequesting a stay of the case pending a decision from the

California Supreme Court regarding the applicable standard for employer provision of meal andrest breaks. Plaintiff filed an opposition to that motion on November 19, 2010. On January 14,2011, the District Court granted KFC's motion and stayed the entire action pending a decision fromthe California Supreme Court. No trial date has been set.

KFC denies liability and intends to vigorously defend against all claims in this lawsuit. However,in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted atthis time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On December 17, 2002, Taco Bell was named as the defendant in a class action lawsuit filed in theUnited States District Court for the Northern District of California styled Moeller, et al. v. TacoBell Corp. On August 4, 2003, plaintiffs filed an amended complaint that alleges, among otherthings, that Taco Bell has discriminated against the class of people who use wheelchairs or scootersfor mobility by failing to make its approximately 220 company-owned restaurants in Californiaaccessible to the class. Plaintiffs contend that queue rails and other architectural and structuralelements of the Taco Bell restaurants relating to the path of travel and use of the facilities bypersons with mobility-related disabilities do not comply with the U.S. Americans with DisabilitiesAct (the “ADA”), the Unruh Civil Rights Act (the “Unruh Act”), and the California DisabledPersons Act (the “CDPA”). Plaintiffs have requested: (a) an injunction from the District Courtordering Taco Bell to comply with the ADA and its implementing regulations; (b) that the DistrictCourt declare Taco Bell in violation of the ADA, the Unruh Act, and the CDPA; and (c) monetaryrelief under the Unruh Act or CDPA. Plaintiffs, on behalf of the class, are seeking the minimumstatutory damages per offense of either $4,000 under the Unruh Act or $1,000 under the CDPA



for each aggrieved member of the class. Plaintiffs contend that there may be in excess of 100,000individuals in the class.

On February 23, 2004, the District Court granted plaintiffs' motion for class certification. Theclass includes claims for injunctive relief and minimum statutory damages.

On May 17, 2007, a hearing was held on plaintiffs' Motion for Partial Summary Judgment seekingjudicial declaration that Taco Bell was in violation of accessibility laws as to three specificissues: indoor seating, queue rails and door opening force. On August 8, 2007, the court grantedplaintiffs' motion in part with regard to dining room seating. In addition, the court grantedplaintiffs' motion in part with regard to door opening force at some restaurants (but not all) anddenied the motion with regard to queue lines.

On December 16, 2009, the court denied Taco Bell's motion for summary judgment on the ADAclaims and ordered plaintiff to file a definitive list of remaining issues and to select one restaurantto be the subject of a trial. The exemplar trial for that restaurant began on June 6, 2011. The trialwas bifurcated and the first stage addressed whether violations existed at the restaurant. Twelvealleged violations of the ADA and state law were tried. The trial ended on June 16, 2011. OnOctober 5, 2011, the court issued its trial decision. The court found liability for the twelve items,finding that they were once out of compliance with applicable state and/or federal accessibilitystandards. The court also found that classwide injunctive relief is warranted. The court declined toorder injunctive relief at this time, however, citing the pendency of Taco Bell's motions to decertifyboth the injunctive and damages class. In a separate order, the court vacated the December 12,2011 date previously set for an exemplar trial for damages on the single restaurant.

On June 20, 2011, the United States Supreme Court issued its ruling in Wal-Mart Stores, Inc. v.Dukes. The Supreme Court held that the class in that case was improperly certified. The same legaltheory was used to certify the class in the Moeller case, and Taco Bell filed a motion to decertifythe class on August 3, 2011. During the exemplar trial, the court observed that the restaurant hadbeen in full compliance with all laws since March, 2010, and Taco Bell argues in its decertificationmotion that, in light of the decision in the Dukes case, no damages class can be certified and thatinjunctive relief is not appropriate, regardless of class status. On October 19, 2011, plaintiffs fileda motion to amend the certified class to include a damages class. Discovery regarding the putativedamages class is proceeding, after which the parties will complete briefing on Taco Bell's motionto decertify and plaintiffs' motion to amend the class.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit.Taco Bell has taken steps to address potential architectural and structural compliance issues atthe restaurants in accordance with applicable state and federal disability access laws. The costsassociated with addressing these issues have not significantly impacted our results of operations.It is not possible at this time to reasonably estimate the probability or amount of liability formonetary damages on a class wide basis to Taco Bell.

On July 9, 2009, a putative class action styled Mark Smith v. Pizza Hut, Inc. was filed in theUnited States District Court for the District of Colorado. The complaint alleged that Pizza Hutdid not properly reimburse its delivery drivers for various automobile costs, uniforms costs, andother job-related expenses and seeks to represent a class of delivery drivers nationwide underthe FLSA and Colorado state law. On January 4, 2010, plaintiffs filed a motion for conditionalcertification of a nationwide class of current and former Pizza Hut, Inc. delivery drivers. However,on March 11, 2010, the court granted Pizza Hut's pending motion to dismiss for failure to statea claim, with leave to amend. On March 31, 2010, plaintiffs filed an amended complaint, whichdropped the uniform claims but, in addition to the federal FLSA claims, asserts state-law classaction claims under the laws of sixteen different states. Pizza Hut filed a motion to dismiss theamended complaint, and plaintiffs sought leave to amend their complaint a second time. On August9, 2010, the court granted plaintiffs' motion to amend. Pizza Hut filed another motion to dismiss theSecond Amended Complaint. On July 15, 2011, the Court granted Pizza Hut's motion with respectto plaintiffs' state law claims, but allowed the FLSA claims to go forward. Plaintiffs filed theirMotion for Conditional Certification on August 31, 2011 to which Pizza Hut filed its opposition on



October 5, 2011. A decision on plaintiffs' Motion for Conditional Certification is expected during2012.

Pizza Hut denies liability and intends to vigorously defend against all claims in this lawsuit.However, in view of the inherent uncertainties of litigation, the outcome of these cases cannot bepredicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On August 6, 2010, a putative class action styled Jacquelyn Whittington v. Yum Brands, Inc.,Taco Bell of America, Inc. and Taco Bell Corp. was filed in the United States District Court forthe District of Colorado. The plaintiff seeks to represent a nationwide class, with the exceptionof California, of salaried assistant managers who were allegedly misclassified and did not receivecompensation for all hours worked and did not receive overtime pay after 40 hours worked ina week. The plaintiff also purports to represent a separate class of Colorado assistant managersunder Colorado state law, which provides for daily overtime after 12 hours worked in a day.The Company has been dismissed from the case without prejudice. Taco Bell filed its answer onSeptember 20, 2010, and the parties commenced class discovery, which is currently on-going. TacoBell moved to compel arbitration of certain employees in the Colorado class. The court denied themotion as premature because no class has yet been certified. On September 16, 2011, the plaintiffsfiled their motion for conditional certification under the FLSA. The plaintiffs did not move forcertification of a separate class of Colorado assistant managers under Colorado state law. TacoBell opposed the motion. The court heard the motion on January 10, 2012, granted conditionalcertification and ordered the notice of the opt-in class be sent to the putative class members. TacoBell expects the notices to be sent by the end of February 2012. Putative class members will have90 days in which to elect to participate in the lawsuit. After further discovery, Taco Bell plans toseek decertification of the class.


We are engaged in various other legal proceedings and have certain unresolved claims pending,the ultimate liability for which, if any, cannot be determined at this time. However, based uponconsultation with legal counsel, we are of the opinion that such proceedings and claims are notexpected to have a material adverse effect, individually or in the aggregate, on our consolidatedfinancial condition or results of operations.



12 Months EndedDescription of Business

(Details)Dec. 31, 2011

operating_segmentscountries_and_territiories

Organization, Consolidation and Presentation of Financial Statements[Abstract]Approximate number of system units 37,000Percent of system units located outside the U.S. (in hundredths) 50.00%Approximate number of countries and territories where system units are located 120Segment Reporting Information [Line Items]Number of operating segments 5U.S.Segment Reporting Information [Line Items]Number of operating segments 3



12 Months EndedFair Value Disclosures(Tables) Dec. 31, 2011

Fair Value Disclosures[Abstract]Fair Value Measurements,Recurring Basis

The following table presents fair values for those assets and liabilities measured at fair valueon a recurring basis and the level within the fair value hierarchy in which the measurementsfall. No transfers among the levels within the fair value hierarchy occurred during the years endedDecember 31, 2011 or December 25, 2010.



Total $ 49 $ 59

Fair Value Measurements andTotal Losses, Non-RecurringBasis

The following tables present the fair values for those assets and liabilities measured at fair valueduring 2011 or 2010 on a non-recurring basis, and that remain on our Consolidated BalanceSheet as of December 31, 2011 or December 25, 2010. Total losses include losses recognizedfrom all non-recurring fair value measurements during the years ended December 31, 2011 andDecember 25, 2010 for assets and liabilities that remain on our Consolidated Balance Sheet as ofDecember 31, 2011 or December 25, 2010:

Fair Value MeasurementsUsing

TotalLosses

As ofDecember 31,

2011 Level 1Level

2Level

3 2011Long-lived assets held for use $ 50 — — 50 128


TotalLosses

As ofDecember 25,

2010 Level 1Level

2Level




12 Months EndedConsolidated Statements ofCash Flows (USD $)


Dec. 31,2011 Dec. 25, 2010 Dec. 26,

2009

Cash Flows - Operating ActivitiesNet Income - including noncontrolling interest $

1,335$1,178 $ 1,083

Depreciation and amortization 628 [1] 589 [1] 580Closures and impairment (income) expenses 135 47 103Refranchising (gain) loss 72 [2],[3] 63 [2],[4],[5] (26) [4]

Contributions to defined benefit pension plans (63) (52) (280)Gain upon consolidation of a former unconsolidated affiliate in China 0 0 (68) [6]

Deferred income taxes (137) (110) 72Equity income from investments in unconsolidated affiliates (47) (42) (36)Distributions of income received from unconsolidated affiliates 39 34 31Excess tax benefit from share-based compensation (66) (69) (59)Share-based compensation expense 59 47 56Changes in accounts and notes receivable (39) (12) 3Changes in inventories (75) (68) 27Changes in prepaid expenses and other current assets (25) 61 (7)Changes in accounts payable and other current liabilities 144 61 (62)Changes in income taxes payable 109 104 (95)Other, net 101 137 82Net Cash Provided by Operating Activities 2,170 1,968 1,404Cash Flows - Investing ActivitiesCapital spending (940) (796) (797)Proceeds from refranchising of restaurants 246 265 194Acquisitions and investments (81) (62) (139)Sales of property, plant and equipment 30 33 34Increase in restricted cash (300) 0 0Other, net 39 (19) (19)Net Cash Used in Investing Activities (1,006) (579) (727)Cash Flows - Financing ActivitiesProceeds from long-term debt 404 350 499Repayments of long-term debt (666) (29) (528)Revolving credit facilities, three months or less, net 0 (5) (295)Short-term borrowings by original maturityMore than three months - proceeds 0 0 0More than three months - payments 0 0 0Three months or less, net 0 (3) (8)Repurchase shares of Common Stock (752) (371) 0Excess tax benefit from share-based compensation 66 69 59Employee stock option proceeds 59 102 113



Dividends paid on Common Stock (481) (412) (362)Other, net (43) (38) (20)Net Cash Used in Financing Activities (1,413) (337) (542)Effect of Exchange Rates on Cash and Cash Equivalents 21 21 (15)Net Increase (Decrease) in Cash and Cash Equivalents (228) 1,073 120Change in Cash and Cash Equivalents due to consolidation of an entityin China 0 0 17

Cash and Cash Equivalents - Beginning of Year 1,426 353 216Cash and Cash Equivalents - End of Year $

1,198$1,426 $ 353

[1] 2011 and 2010 include depreciation reductions arising from the impairment of KFC restaurants we offered tosell of $10 million and $9 million, respectively. 2011 includes a depreciation reduction arising from theimpairment of Pizza Hut UK restaurants we decided to sell in 2011 of $3 million. See Note 4.

[2] U.S. refranchising losses in the years ended December 31, 2011 and December 25, 2010 are primarily due tolosses on sales of and offers to refranchise KFCs in the U.S. There were approximately 250 and 600 KFCrestaurants offered for refranchising as of December 31, 2011 and December 25, 2010, respectively. Whilewe did not yet believe these KFCs met the criteria to be classified as held for sale, we did, consistent withour historical practice, review the restaurants for impairment as a result of our offer to refranchise. Werecorded impairment charges where we determined that the carrying value of restaurant groups to be soldwas not recoverable based upon our estimate of expected refranchising proceeds and holding period cashflows anticipated while we continue to operate the restaurants as company units. For those restaurant groupsdeemed impaired, we wrote such restaurant groups down to our estimate of their fair values, which werebased on the sales price we would expect to receive from a franchisee for each restaurant group. This fairvalue determination considered current market conditions, real-estate values, trends in the KFC U.S.business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurantgroups to date. The non-cash impairment charges that were recorded related to our offers to refranchise thesecompany-operated KFC restaurants in the U.S. decreased depreciation expense versus what would haveotherwise been recorded by $10 million and $9 million in the years ended December 31, 2011 andDecember 25, 2010, respectively. These depreciation reductions were not allocated to the U.S. segmentresulting in depreciation expense in the U.S. segment results continuing to be recorded at the rate at which itwas prior to the impairment charges being recorded for these restaurants. We will continue to review therestaurant groups for any further necessary impairment until the date they are sold. The aforementioned non-cash impairment charges do not include any allocation of the KFC reporting unit goodwill in the restaurantgroup carrying value. This additional non-cash write-down would be recorded, consistent with our historicalpolicy, if the restaurant groups, or any subset of the restaurant groups, ultimately meet the criteria to beclassified as held for sale. We will also be required to record a charge for the fair value of our guarantee offuture lease payments for leases we assign to the franchisee upon any sale.

[3] During the year ended December 31, 2011 we decided to refranchise or close all of our remaining Company-operated Pizza Hut restaurants in the UK market. While an asset group comprising approximately 350 dine-in restaurants did not meet the criteria for held-for-sale classification as of December 31, 2011, our- decisionto sell was considered an impairment indicator. As such we reviewed this asset group for potentialimpairment and determined that its carrying value was not recoverable based upon our estimate of expectedrefranchising proceeds and holding period cash flows anticipated while we continue to operate therestaurants as company units. Accordingly, we wrote this asset group down to our estimate of its fair value,which is based on the sales price we would expect to receive from a buyer. This fair value determinationconsidered current market conditions, trends in the Pizza Hut UK business, and prices for similartransactions in the restaurant industry and resulted in a non-cash pre-tax write-down of $74 million which



was recorded to Refranchising (gain) loss. This impairment charge decreased depreciation expense versuswhat would have otherwise been recorded by $3 million in 2011. This depreciation reduction was notallocated to the YRI segment, resulting in depreciation expense in the YRI segment results continuing to berecorded at the rate at which it was prior to the impairment charges being recorded for these restaurants. Wewill continue to review the asset group for any further necessary impairment until the date it is sold. Thewrite-down does not include any allocation of the Pizza Hut UK reporting unit goodwill in the asset groupcarrying value. This additional non-cash write-down would be recorded, consistent with our historical policy,if the asset group ultimately meets the criteria to be classified as held for sale. Upon the ultimate sale of therestaurants, depending on the form of the transaction, we could also be required to record a charge for thefair value of any guarantee of future lease payments for any leases we assign to a franchisee and for thecumulative foreign currency translation adjustment associated with Pizza Hut UK. The decision torefranchise or close all remaining Pizza Hut restaurants in the UK was considered to be a goodwillimpairment indicator. We determined that the fair value of our Pizza Hut UK reporting unit exceeded itscarrying value and as such there was no impairment of the approximately $100 million in goodwillattributable to the reporting unit.

[4] During the year ended December 26, 2009 we recognized a non-cash $10 million refranchising loss as aresult of our decision to offer to refranchise our KFC Taiwan equity market. During the year endedDecember 25, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of124 KFCs. We included in our December 25, 2010 financial statements a non-cash write-off of $7 million ofgoodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a relatedincome tax benefit. The amount of goodwill write-off was based on the relative fair values of the Taiwanbusiness disposed of and the portion of the business that was retained. The fair value of the businessdisposed of was determined by reference to the discounted value of the future cash flows expected to begenerated by the restaurants and retained by the franchisee, which include a deduction for the anticipatedroyalties the franchisee will pay the Company associated with the franchise agreement entered into inconnection with this refranchising transaction. The fair value of the Taiwan business retained consists ofexpected, net cash flows to be derived from royalties from franchisees, including the royalties associatedwith the franchise agreement entered into in connection with this refranchising transaction. We believe theterms of the franchise agreement entered into in connection with the Taiwan refranchising are substantiallyconsistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30million, after the aforementioned write-off, was determined not to be impaired as the fair value of the Taiwanreporting unit exceeded its carrying amount.

[5] In the year ended December 25, 2010 we recorded a $52 million loss on the refranchising of our Mexicoequity market as we sold all of our Company-owned restaurants, comprised of 222 KFCs and 123 PizzaHuts, to an existing Latin American franchise partner. The buyer is serving as the master franchisee forMexico which had 102 KFC and 53 Pizza Hut franchise restaurants at the time of the transaction. The write-off of goodwill included in this loss was minimal as our Mexico reporting unit included an insignificantamount of goodwill. This loss did not result in any related income tax benefit.

[6] See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in Shanghai,China.



12 Months EndedEarnings Per CommonShare ("EPS") Dec. 31, 2011

Earnings Per Share[Abstract]Earnings Per Common Share(EPS)

Earnings Per Common Share (“EPS”)

2011 2010 2009

Net Income – YUM! Brands, Inc. $ 1,319 $ 1,158 $ 1,071Weighted-average common shares outstanding (for basiccalculation) 469 474 471Effect of dilutive share-based employee compensation 12 12 12Weighted-average common and dilutive potential commonshares outstanding (for diluted calculation) 481 486 483

Basic EPS $ 2.81 $ 2.44 $ 2.28

Diluted EPS $ 2.74 $ 2.38 $ 2.22Unexercised employee stock options and stock appreciationrights (in millions) excluded from the diluted EPScomputation(a) 4.2 2.2 13.3

(a) These unexercised employee stock options and stock appreciation rights were notincluded in the computation of diluted EPS because to do so would have been antidilutivefor the periods presented.



12 Months EndedOther (Income) Expense(Details) (USD $)


Dec. 31, 2011 Dec. 25, 2010 Dec. 26, 2009

Other Income and Expenses [Abstract]Equity income from investments in unconsolidated affiliates $ (47) $ (42) $ (36)Gain upon consolidation of a former unconsolidated affiliate in China 0 0 (68) [1]

Foreign exchange net (gain) loss and other (6) (1) 0Other (income) expense $ (53) $ (43) $ (104)[1] See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in Shanghai,

China.



12 Months EndedShareholders' Equity(Details) (USD $)

In Millions, except Sharedata, unless otherwise

specified

Dec. 31, 2011 Dec. 25,2010

Dec. 26,2009

Repurchase Of Shares Of The Company's Common Stock [LineItems]Shares Repurchased (in shares) 14,305,000 [1] 9,759,000 [1] 0Dollar Value of Shares Repurchased $ 733 [1] $ 390 [1] $ 0Value of share repurchases in current fiscal year but with settlement datesin subsequent year 19

Value of share repurchases in current fiscal year but with settlement datesin subsequent year (in shares) 400,000

Accumulated other comprehensive income (loss), net of tax [Abstract]Foreign currency translation adjustment 140 55Pension and post-retirement losses, net of tax (375) (269)Net unrealized losses on derivative instruments, net of tax (12) (13)Total accumulated other comprehensive income (loss) (247) (227)November 2011 [Member]Repurchase Of Shares Of The Company's Common Stock [LineItems]Shares Repurchased (in shares) 0 0 0Dollar Value of Shares Repurchased 0 0 0Authorized Share Repurchases 750Expiration Date Of Share Repurchase Authorization May 2013January 2011 [Member]Repurchase Of Shares Of The Company's Common Stock [LineItems]Shares Repurchased (in shares) 10,864,000 0 0Dollar Value of Shares Repurchased 562 0 0Remaining dollar value of shares that may be repurchased 188March 2010 [Member]Repurchase Of Shares Of The Company's Common Stock [LineItems]Shares Repurchased (in shares) 3,441,000 2,161,000 0Dollar Value of Shares Repurchased 171 107 0September 2009 [Member]Repurchase Of Shares Of The Company's Common Stock [LineItems]Shares Repurchased (in shares) 0 7,598,000 0Dollar Value of Shares Repurchased $ 0 $ 283 $ 0[1] 2011 amount excludes and 2010 amount includes the effect of $19 million in share repurchases (0.4 million

shares) with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010fiscal year.



12 Months EndedSelected Quarterly FinancialData (Unaudited) Dec. 31, 2011

Quarterly FinancialInformation Disclosure[Abstract]Selected Quarterly FinancialData (Unaudited)

Selected Quarterly Financial Data (Unaudited)

2011First


ThirdQuarter

FourthQuarter Total


374 385 420 554 1,733

Total revenues 2,425 2,816 3,274 4,111 12,626Restaurant profit 360 386 494 513 1,753Operating Profit(a) 401 419 488 507 1,815Net Income – YUM! Brands, Inc. 264 316 383 356 1,319Basic earnings per common share 0.56 0.67 0.82 0.77 2.81Diluted earnings per common share 0.54 0.65 0.80 0.75 2.74Dividends declared per commonshare

— 0.50 — 0.57 1.07

2010First


ThirdQuarter

FourthQuarter Total


349 354 366 491 1,560

Total revenues 2,345 2,574 2,862 3,562 11,343Restaurant profit 340 366 479 478 1,663Operating Profit(b) 364 421 544 440 1,769Net Income – YUM! Brands, Inc. 241 286 357 274 1,158Basic earnings per common share 0.51 0.61 0.76 0.58 2.44Diluted earnings per common share 0.50 0.59 0.74 0.56 2.38Dividends declared per commonshare

0.21 0.21 — 0.50 0.92

(a) Includes net losses of $65 million primarily related to the LJS and A&W divestitures, $88million primarily related to refranchising international markets and $28 million primarilyrelated to the U.S. business transformation measures and U.S. refranchising in the first,third and fourth quarters of 2011, respectively. See Note 4. The fourth quarter of 2011also includes the $25 million impact of the 53rd week. See Note 2.

(b) Includes net losses of $66 million and $19 million in the first and fourth quarters of2010, respectively, related primarily to the U.S. business transformation measures andrefranchising international markets. See Note 4.



12 Months EndedIncome Taxes (Details 5)(USD $)


Dec.31,

2011

Dec.25,

2010

Dec.26,

2009Unrecognized tax benefits [Abstract]Percentage threshold that the positions taken or expected to be taken is more likely thannot sustained upon examination by tax authorities (in hundredths) 50.00%

Unrecognized tax benefits, which, if recognized, would affect effective tax rate $ 197 $ 227Unrecognized tax benefits reconciliation [Roll Forward]Beginning of Year 308 301Additions on tax positions related to the current year 85 45Additions for tax positions of prior years 38 35Reductions for tax positions of prior years (58) (19)Reductions for settlements (8) (41)Reductions due to statute expiration (22) (10)Foreign currency translation adjustment 5 (3)End of Year 348 308 301Income Tax Examination [Line Items]Accrued interest and penalties 53 48Total interest and penalties recorded during the period (2) 13 6U.S. federal [Member]Income Tax Examination [Line Items]Open tax years 2004 –

2011U.S. federal [Member] | Income Tax Expense (Benefit) [Member] | 2004 - 2006Income Tax Examination [Line Items]Possible losses due to an IRS proposed adjustment to increase the taxable value ofrights to intangibles transferred to foreign subsidiaries 700

U.S. federal [Member] | Income Tax Expense (Benefit) [Member] | 2007 - presentIncome Tax Examination [Line Items]Possible losses due to an IRS proposed adjustment to increase the taxable value ofrights to intangibles transferred to foreign subsidiaries 350

U.S. federal [Member] | Interest Expense [Member] | 2004 - 2006Income Tax Examination [Line Items]Possible losses due to an IRS proposed adjustment to increase the taxable value ofrights to intangibles transferred to foreign subsidiaries 170

U.S. federal [Member] | Interest Expense [Member] | 2007 - presentIncome Tax Examination [Line Items]Possible losses due to an IRS proposed adjustment to increase the taxable value ofrights to intangibles transferred to foreign subsidiaries $ 25

China tax authority [Member]Income Tax Examination [Line Items]Open tax years 2008 –

2011



United Kingdom tax authority [Member]Income Tax Examination [Line Items]Open tax years 2003 –

2011Mexico tax authority [Member]Income Tax Examination [Line Items]Open tax years 2005 –

2011Australia tax authority [Member]Income Tax Examination [Line Items]Open tax years 2007 –

2011



12 Months EndedShort-term Borrowings andLong-term Debt (Tables) Dec. 31, 2011

Debt Disclosure [Abstract]Schedule of Debt [Table TextBlock] 2011 2010

Short-term BorrowingsCurrent maturities of long-term debt $ 315 $ 668Current portion of fair value hedge accounting adjustment (SeeNote 12)

5 5

Unsecured International Revolving Credit Facility, expiresNovember 2012

— —

Unsecured Revolving Credit Facility, expires November 2012 — —$ 320 $ 673


3,291 3,557Less current maturities of long-term debt (315) (668)Long-term debt excluding long-term portion of hedge accountingadjustment 2,976 2,889Long-term portion of fair value hedge accounting adjustment (SeeNote 12) 21 26


Debt Instrument [Line Items]Annual maturities of short-termborrowings and long-term debtexcluding capital lease obligationsand derivative instrumentadjustments

The annual maturities of short-term borrowings and long-term debt as of December 31,2011, excluding capital lease obligations of $279 million and fair value hedge accountingadjustments of $26 million, are as follows:


Total $ 3,019

Senior Unsecured Notes [Member]Debt Instrument [Line Items]Senior Unsecured Notes issued thatremain outstanding

The following table summarizes all Senior Unsecured Notes issued that remain outstandingat December 31, 2011:

Interest Rate



Issuance Date(a) Maturity Date

PrincipalAmount (in




(b) Includes the effects of the amortization of any (1) premium or discount; (2) debtissuance costs; and (3) gain or loss upon settlement of related treasury locks andforward-starting interest rate swaps utilized to hedge the interest rate risk prior tothe debt issuance. Excludes the effect of any swaps that remain outstanding asdescribed in Note 12.



12 Months EndedFair Value Disclosures Dec. 31, 2011Fair Value Disclosures[Abstract]Fair Value Disclosures Fair Value Disclosures

The following table presents fair values for those assets and liabilities measured at fair valueon a recurring basis and the level within the fair value hierarchy in which the measurementsfall. No transfers among the levels within the fair value hierarchy occurred during the years endedDecember 31, 2011 or December 25, 2010.



Total $ 49 $ 59

The fair value of the Company’s foreign currency forwards and interest rate swaps weredetermined based on the present value of expected future cash flows considering the risksinvolved, including nonperformance risk, and using discount rates appropriate for the durationbased upon observable inputs. The other investments include investments in mutual funds, whichare used to offset fluctuations in deferred compensation liabilities that employees have chosen toinvest in phantom shares of a Stock Index Fund or Bond Index Fund. The other investments areclassified as trading securities and their fair value is determined based on the closing market pricesof the respective mutual funds as of December 31, 2011 and December 25, 2010.

The following tables present the fair values for those assets and liabilities measured at fair valueduring 2011 or 2010 on a non-recurring basis, and that remain on our Consolidated BalanceSheet as of December 31, 2011 or December 25, 2010. Total losses include losses recognizedfrom all non-recurring fair value measurements during the years ended December 31, 2011 andDecember 25, 2010 for assets and liabilities that remain on our Consolidated Balance Sheet as ofDecember 31, 2011 or December 25, 2010:


TotalLosses

As ofDecember 31,

2011 Level 1Level

2Level



TotalLosses

As ofDecember 25,

2010 Level 1Level

2Level




Long-lived assets held for use presented in the tables above include restaurants or groups ofrestaurants that were impaired either as a result of our semi-annual impairment review or whenit was more likely than not a restaurant or restaurant group would be refranchised. Of the $128million in impairment charges shown in the table above for the year ended December 31, 2011,$95 million was included in Refranchising (gain) loss and $33 million was included in Closuresand impairment (income) expenses in the Consolidated Statements of Income.

Of the $110 million impairment charges shown in the table above for the year ended December 25,2010, $80 million was included in Refranchising (gain) loss and $30 million was included inClosures and impairment (income) expenses in the Consolidated Statements of Income.

At December 31, 2011 the carrying values of cash and cash equivalents, accounts receivableand accounts payable approximated their fair values because of the short-term nature of theseinstruments. The fair value of notes receivable net of allowances and lease guarantees lesssubsequent amortization approximates their carrying value. The Company’s debt obligations,excluding capital leases, were estimated to have a fair value of $3.5 billion, compared to theircarrying value of $3.0 billion. We estimated the fair value of debt using market quotes andcalculations based on market rates.



SECURITIES AND EXCHANGE COMMISSIONpdf.secdatabase.com/541/0001041061-12-000005.pdf · and location...

Documents

Transcript of SECURITIES AND EXCHANGE COMMISSIONpdf.secdatabase.com/541/0001041061-12-000005.pdf · and location...